Alabama Retainage Requirements
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10% Retainage Limit
Retainage is limited to no more than 10% of estimated amount of work
60 Day Pay Period
Owner must release retainage within 60 days of completion of the work.
There is a Process to Recover
Yes, notice required prior to filing civil action.
Not Held In Escrow
In Alabama, contractors and owners do not need to hold retainage funds in a separate escrow account.
Before completion and acceptance of the project, retainage must be at least 5%. After 95% of the work is complete, withheld funds may be reduced to 125% of the estimated value of unfinished work.
Once the contract is 50% complete, no additional retainage can be withheld. Retainage must be released upon completion/acceptance of each contract division, unless the division is an integral component.
There's No Process to Recover
No process is specified by state statute.
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 Alabama’s retainage requirements. The Alabama retainage statutes are reproduced below on this page.