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is there a retainer on performance bond?

4 weeks ago

I need to bill a contractor for the performance bond and I was told to bill complete and not subtract 10% retainer. I want to know if that is correct. And can contractor hold 10% for retainer on a performance bond.

Senior Legal Associate Levelset

I apologize, but I’m not entirely sure I understand the situation you described above. And, without better understanding your role on the project and why bonding has been undertaken, it’s hard to pinpoint what rules may or may not apply to your situation.

With that being said – those who have been hired by a contractor on a job that’s bonded typically do not reduce their invoices or payment applications, themselves. Rather, the withholding for retainage will generally be done by the party who’s making payment – and they’ll generally note that a certain percentage is being withheld for retainage.

As for whether retainage is allowed on a bonded project, both public and private projects in California are subject to retainage rules created by the state, so retainage can generally be withheld on California construction projects. On public projects, retainage can be withheld up to 5%. For private projects, retainage isn’t capped. You can learn more about retainage on California construction projects here: California Retainage Overview

If you aren’t referring to retainage on a construction project, then whether or not a certain sum can or should be withheld will depend upon the contract. Ultimately, the contract will set out what is and isn’t acceptable in terms of payment. Actions that are not set out under the contract will generally not be allowed after the contract is signed.

I hope some of this information has been helpful! Feel free to post another, more-detailed question so we might be able to provide a little more insight for you!

For more information on payment and performance bonds, and how they may apply to your project – here are some additional resources:
(1) Construction Performance Bonds | Protecting Cash Flow on Public Jobs
(2) Construction Payment Bonds – What Contractors and Suppliers Must Know

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