Maryland Retainage Overview

Retainage serves two general purposes: (1) To provide an incentive to the contractor or subcontractor to complete the project; and (2) To give the owner some protection against problems like liens, contractual defaults, delays, and more. In most states, laws exist to regulate how the parties use the retainage concept, mostly protecting some parties against abuse of the tool from others. The following are resources, legal information, and frequently asked questions about Maryland’s retainage requirements. The Maryland retainage statutes are reproduced below on this page.

Maryland Retainage for Private Projects FAQs

Maryland Retainage FAQs

Does Maryland limit the amount of retainage that can be withheld from a contractor?

Maryland does not provide a retainage statute for private projects.

How long can a party withhold retainage in Maryland?

Maryland does not provide a retainage statute for private projects.

Does Maryland require retained funds be deposited in a special account? Can securities be substituted for retainage?

Maryland does not provide a retainage statute for private projects.

How can I make a claim to recover retainage in Maryland?

Maryland does not provide a retainage statute for private projects.

Is there a specific notice required to recover retainage in Maryland?

Maryland does not provide a retainage statute for private projects.

Maryland Retainage for Public Projects FAQ

Maryland Retainage FAQs

Does Maryland limit the amount of retainage that can be withheld from a contractor?

Maximum retainage on a 100% bonded project is 5%.  The public entity is entitled to withhold any amount the unit believes necessary to protect the state’s interest. Contractors and subcontractors are allowed to withhold retainage only in the same percentage that has been withheld by the public entity unless it determines that the subcontractor’s or sub-subcontractor’s performance provides reasonable grounds for an increased withholding percentage.

How long can a party withhold retainage in Maryland?

The public entity shall release any retainage due to contractor within 120 days after satisfactory completion of a contract for construction. If there is a dispute, the 120 day period starts after the resolution of the dispute or contract claim.

Does Maryland require retained funds be deposited in a special account? Can securities be substituted for retainage?

This is not specified in Maryland’s retainage statute.

How can I make a claim to recover retainage in Maryland?

Claim must be filed within 1 year after the public body finally accepts the work performed under the contract.

Is there a specific notice required to recover retainage in Maryland?

This is not specified in Maryland’s retainage statute.

Maryland Retainage Statutes

Getting informed about prompt payment laws is important. An examination of Maryland’s retainage laws, the rules and regulations related to the amount and timing of allowable retained payments, is important to know your rights and responsibilities as a party on a construction project. Maryland’s specific laws can be found in: MD. Code Ann. State Fin. & Proc. § 17-110, and are reproduced below.

Retainage Statute on Private Projects

N/A

Maryland does not provide a retainage statute for private projects.

Retainage Statute on Public Projects

§ 17-110: Retention of Percentage of Total Amount of Contract as Security

(a) Applicability of subsections (b)(1) and (2), (c) and (d). —  Subsections (b)(1) and (2), (c), and (d) of this section do not apply to an entity that is required to comply with the provisions of § 13-225 of this article.

(b) In general. 

(1)  If a contractor has furnished 100% payment security and 100% performance security in accordance with this subtitle under a contract for construction awarded by a public body, the percentage specified in the contract for retainage may not exceed 5% of the total amount of the contract.

(2)  In addition to retainage, a public body may withhold from payments otherwise due a contractor any amount that the public body reasonably believes necessary to protect the public body’s interest.

(3)  Except as provided in paragraph (4) of this subsection, within 120 days after satisfactory completion of a contract for construction, a public body shall release any retainage due to the contractor.

(4)  If there is a dispute or contract claim between the contractor and the public body concerning the satisfactory completion of a contract for construction, the public body shall release the retainage to the contractor within 120 days after the resolution of the dispute or contract claim.

(c) Retention of payments due a subcontrator.

(1)  A contractor may not retain a percentage of payments due a subcontractor that exceeds the percentage of payments retained by the public body.

(2)  Paragraph (1) of this subsection may not be construed to prohibit a contractor from withholding any amount in addition to retainage if the contractor determines that a subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount.

(d) Retention of payments due a lower tier subcontractor.

(1)  A subcontractor may not retain a percentage of payments due a lower tier subcontractor that exceeds the percentage of payments retained from the subcontractor.

(2)  Paragraph (1) of this subsection may not be construed to prohibit a subcontractor from withholding any amount in addition to retainage if the subcontractor determines that a lower tier subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount.

(e) Construction.  This section may not be construed to limit the application of the remaining provisions of this subtitle.