I have a question regarding customers holding retention. We have a customer who is holding 10% retention on a project. The project has been delayed so they do not have gas or power to test the fireplaces or garage doors. Due to the delays the customer is saying they do not know when they will get gas or power and will not pay until we can test the fireplaces and garage door. The amount he is holding is roughly $4,000.00, but the only thing we need to do not is do labor which totals $750.00. Can the customer hold this much and if they can how long can they hold this amount?
A direct contractor's retainage must be released within 45 days of completion in California, and the contractor must then pay its subcontractors and suppliers within 10 days of receiving all or part of that retention. Beyond that timeframe, payment can only (legally and legitimately) be withheld if there's an ongoing good faith dispute that specifically relates to the amount being withheld. So, unrelated issues on the project can't be the basis for withholding someone else's payment. Here's a good source of CA retainage information: California Retainage Laws | A Guide to Private & Public Projects.
If the customer is being unreasonable about retainage, or if they're illegally holding amounts in excess of what's allowed, then sending a payment demand or threatening to file a mechanics lien could be good options for forcing payment. Levelset discusses those options in greater detail here: (1) Construction Demand Letters – How To Write One That Gets You Paid; and (2) What is A Notice of Intent to Lien And Should I Send One?
And, if negotiations stall, note that actually filing a mechanics lien is a common path for construction businesses who are wrongly being denied retainage. You can learn more about mechanics liens and how they work in California here: (1) How Do Mechanics Liens Work? 17 Ways a Lien Gets You Paid; and (2) California Mechanics Lien Rules & FAQs.