Colorado Retainage Guide and FAQs

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Colorado Retainage FAQs

Colorado Retainage Requirements


Retainage 5% Icon
Retainage Limit

Retainage from any party may not exceed 5% of the price of the work completed.


Payment Period Not Regulated Icon
Pay Period

Not Regulated by State Law


NO
PROCESS
There's No Process to Recover

N/A


No Escrow Icon
Not Held In Escrow

In Colorado, contractors and owners do not need to hold retainage funds in a separate escrow account.

Retainage 5% Icon
5 Percent

5% of the contract price.


60/7
DAYS
60 Days From Completion & 7 Days After Receipt

Retainage is released by the public entity 60 days after the contract is completed and accepted. Upon receipt, contractors have 7 calendar days to pay subcontractors.


NO
PROCESS
There's No Process to Recover

Not Specified

Retainage, also called “retention,” is an amount of money “held back” from a contractor or subcontractor during the course of a construction project. In general, retainage serves two main purposes:

  • To provide an incentive to the contractor or subcontractor to complete the project; &
  • 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 Colorado’s retainage requirements.

Colorado’s retainage limits & deadlines

Colorado’s retainage statutes only apply to public works projects where the original contract price is $150,000 or more. Retainage practices on private projects aren’t regulated in Colorado, and will therefore be governed bay the terms of the contract.

On public projects, the maximum amount of retainage that can be withheld is 5% from each progress payment. Once the prime contract has been completed and accepted by the public entity, retainage must be released to the prime contractor within 60 days. Upon receipt, retainage must be release to subs and suppliers within 7 days. Failure to timely release retainage to any subcontractor will be subject to an interest rate of 15% per year, or the rate set out in the contract; whichever is higher.

Colorado Retainage Frequently Asked Questions

Colorado Retainage Private Projects FAQs

What types of private projects are governed by Colorado's retainage laws?

Colorado’s retainage laws apply to all private construction projects where the total contract price is at least $150K or more. There are, however, some exceptions. These include:

• Single-family dwellings

• Multi-family dwellings with no more than 4 family dwelling units; or

• Contracts with a public entity.

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Colorado Retainage FAQs
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Colorado Retainage FAQs
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Does Colorado limit the amount of retainage that can be withheld from a contractor?

Yes, the amount of retainage that can be withheld on applicable private projects in Colorado is capped at no more than 5% of each progress payment.

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Colorado Retainage FAQs
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Colorado Retainage FAQs
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How long can a party withhold retainage in Colorado?

There is no specific deadline for the release of retainage on private projects in Colorado. The release of retainage by the property owner will be determined by the prime contract.

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

There is no specific requirement for retainage to be deposited in any special account, such as an escrow account. As far as substitution of securities, this will be determined by the terms of the contract.

• Read more: Retention Bonds- An Alternative to Waiting for Retainage

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Colorado Retainage FAQs
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How can I make a claim to recover retainage in Colorado?

No method had been specified for the recovery of retainage in Colorado. Presumably, other collections tools – like filing a mechanics lien claim, or pursuing contract claims are available to recover retainage payments.

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Colorado Retainage FAQs
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Is there a specific notice required to recover retainage in Colorado?

There is no special notice for the recovery of retainage on Colorado private projects. Sending a Notice of Intent to Lien is a good place to start.

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Colorado Retainage FAQs
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Colorado Retainage Public Projects FAQs

What types of public projects are governed by Colorado retainage laws?

The Colorado retainage laws are founds in the Colorado prompt payment statutes which apply to all public construction projects over $150,000 for the construction, alteration, or repair of any highway, public building, public work, or public improvement, structure, or system. This covers all projects commissioned by a state, county, municipal government entity, or any other political subdivision within the state.

• Unsure what type of project you’re on? See: Types of Construction Projects – What They Are & Why You Should Care

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Colorado Retainage FAQs
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Does Colorado limit the amount of retainage that can be withheld from a contractor?

Yes, the amount of retainage that can be withheld on Colorado public works projects is capped at a maximum of 5% of each progress payment.

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Colorado Retainage FAQs
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How long can a party withhold retainage in Colorado?

Retainage and final payment are required to be released within 60 days of project completion and acceptance by the public entity.

• Upon request by the contractor, the public entity can release the retainage to the contractor or subcontractors who have completed their work accepted by the entity.

Once a party has received retainage payments, they must release retainage to their subs and suppliers within 7 days. Failure tot timely release retainage to any subcontractor will be subject to interest penalties at a rate of 15% per year, or the rate set out by contract; whichever is higher.

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

Colorado law does not require retained funds be deposited in a special account. However, the law does allow for securities to be substituted for retainage.

• For more on this, see: Retention Bonds- An Alternative to Waiting for Retainage

Summary
Colorado Retainage FAQs
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Colorado Retainage FAQs
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Summary of Colorado Retainage requirements and laws for Colorado construction projects including free forms, FAQs, resources and more.
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How can I make a claim to recover retainage in Colorado?

No method had been specified for the recovery of retainage in Colorado. Presumably, other collections tools – like filing a bond claim, claims under the Colorado Prompt Payment Act, or pursuing contract claims are available to recover retainage payments.

Summary
Colorado Retainage FAQs
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Colorado Retainage FAQs
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Summary of Colorado Retainage requirements and laws for Colorado construction projects including free forms, FAQs, resources and more.
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Is there a specific notice required to recover retainage in Colorado?

There is no special notice for the recovery of retainage on Colorado public works projects. Sending a Prompt Payment Demand Letter and a Notice of Intent to Make a Bond Claim is a good place to start.

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Colorado Retainage FAQs
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Colorado Retainage FAQs
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Summary of Colorado Retainage requirements and laws for Colorado construction projects including free forms, FAQs, resources and more.
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Colorado Retainage
Recent Questions & Answers

When can I lien a project for retention?

Many times we are one of the first contractors on site. We typically finish our work within a few months. These projects that we are working on take sometimes 2-3 years before they are complete. Per Colorado law we have to file a lien within 120 days of the last day we are on site, thus we...

Can the prime contractor withhold funds if retainage is not included in the contract.

Is retainage allowed in Colorado if it is not included in the contract? A prime contractor is withholding 10% retainage, even though it is not part of the contract. He is then holding funds for damages to the landscape by equipment, and final funds for the equipment rental.

Is retainage and split/cost savings allowed to be included on a lien?

General contractor lien to owner for unpaid amount due on commercial project.

How to file a lien in Colorado

Need to file a Colorado mechanics lien? File your mechanics lien with Levelset, the lien experts quickly and easily. Or you can follow the 3 steps below to file a lien yourself with Levelset’s free information.
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Colorado Retainage Statutes

Getting informed about prompt payment laws is important. An examination of Colorado’s retainage laws, the rules, and regulations related to the amount and timing of allowable retained payments are important to know your rights and responsibilities as a party on a construction project. Colorado’s specific laws can be found in Colorado Revised Statutes §38-46-101 et seq for private projects and CRS § 24-91-103 and §§ 24-91-105, -108, for public projects and are reproduced below. Updated as of 2021.

Retainage Statute on Private Projects

§ 38-46-101. Definitions

As used in this article 46, unless the context otherwise requires:

(1) “Contract” means a contract to construct, alter, or repair a structure on or improvement on real property.

(2) “Contractor” means a person that is a party to a contract with a property owner.

(3) “Property owner” means a private person with an interest, including a leasehold interest, in real property or in a real property fixture that has entered into a contract with a contractor.

(4) “Retainage” means a percentage of:

(a) a contract or subcontract price retained from a contractor or subcontractor as assurance that the contract or subcontract will be satisfactorily completed; or

(b) a supply agreement price as assurance that the goods, materials, or equipment meets the specifications necessary for satisfactory performance of a contract or subcontract.

(5)

(a) “Subcontract” means an agreement:

(I) To perform a portion of the work required by a contract; and

(II) To furnish or perform on-site labor, with or without furnishing materials.

(b) To be a subcontract, an agreement need not be made directly with a contractor; the agreement may be made with a subcontractor or a subsequent subcontractor.

(6) “Subcontractor” means a person that enters into a subcontract with a contractor, a subcontractor, or a subsequent subcontractor.

(7) “Subsequent subcontractor” includes a person who has signed a subcontract with a sub-subcontractor, a sub-sub-subcontractor, or any additional level of subcontractor.

(8) “Supply agreement” means an agreement to provide materials, goods, or equipment to a contractor or subcontractor.

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§ 38-46-102. Applicability of article

(1) Except as provided in subsection (2) of this section, this article 46 applies to:

(a) a contract that:

(I) Has a price of at least one hundred fifty thousand dollars; and

(II) Is made between a property owner and a contractor;

(b) a subcontract to a contract described in subsection (1)(a) of this section, notwithstanding that the subcontract price is less than one hundred fifty thousand dollars; and

(c) a supply agreement that is made to supply materials, goods, or equipment used to perform a contract notwithstanding that the supply agreement price is less than one hundred fifty thousand dollars.

(2) This article 46 does not apply to:

(a) a single contract that governs the building of either:

(I) One single-family dwelling; or

(II) One multifamily dwelling with no more than four family dwelling units; or

(b) a contract with a public entity, as defined in section 24-91-102 (3).

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§ 38-46-103. Private construction contracts - retainage - conditions precedent

(1) A property owner, Contractor, or subcontractor shall not withhold as retainage more than five percent of the price of the work completed under the contract or subcontract. Making a partial payment under this subsection (1) is not acceptance or approval of some of the work or of a waiver of defects in the work.

(2) This article 46 addresses only the amount of retainage that may be withheld by a property owner, contractor, or subcontractor and does not change, override, or invalidate any other provision in a contract, subcontract, or supply agreement. Such a provision includes, but is not limited to:

(a) a provision relating to timing of a payment, including final payment;

(b) a provision requiring satisfactory performance of the work of the Contract, Subcontract, or supply agreement before payment is due;

(c) a provision allowing a property owner, Contractor, or subcontractor to withhold payment or deduct from any payment otherwise due any backcharges or other amounts as authorized by the Contract, Subcontract, or supply agreement; or

(d) a provision relating to a condition precedent that must be satisfied before a payment is due to a contractor, Subcontractor, sub-Subcontractor, or supplier. A condition precedent includes a requirement that:

(I) a contractor must actually receive payment from the property owner to be obliged to make payment to a subcontractor or supplier; or

(II) a subcontractor must actually receive payment from the contractor to be obliged to make payment to a subsequent subcontractor or supplier.

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§ 38-46-104. Lien waivers

To receive payment under this article 46, the recipient of the payment must provide an executed lien waiver for amounts actually paid if required by the contract, Subcontract, or Supply agreement.

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Retainage Statute on Public Projects

§ 24-91-103. Public entity; contracts; partial payments

(1)

(a) A public entity awarding a contract exceeding one hundred fifty thousand dollars for the construction, alteration, or repair of any highway, public building, public work, or public improvement, structure, or system, including real property as defined in section 24-30-1301(15), shall authorize partial payments of the amount due under such contract at the end of each calendar month, or as soon thereafter as practicable, to the contractor, if the contractor is satisfactorily performing the contract. The public entity shall pay at least ninety-five percent of the calculated value of completed work. The withheld percentage of the contract price of any contracted work, improvement, or construction may be retained until the contract is completed satisfactorily and finally accepted by the public entity.

(b) The public entity shall make a final settlement in accordance with section 38-26-107, C.R.S., within sixty days after the contract is completed satisfactorily and finally accepted by the public entity.

(c) If the public entity finds that satisfactory progress is being made in any phase of the contract, it may, upon written request by the contractor, authorize final payment from the withheld percentage to the contractor or subcontractors who have completed their work in a manner finally acceptable to the public entity. Before the payment is made, the public entity shall determine that satisfactory and substantial reasons exist for the payment and shall require written approval from any surety furnishing bonds for the contract work.

(2) Whenever a contractor receives payment pursuant to this section, the contractor shall make payments to each of his subcontractors of any amounts actually received which were included in the contractor’s request for payment to the public entity for such subcontracts. The contractor shall make such payments within seven calendar days of receipt of payment from the public entity in the same manner as the public entity is required to pay the contractor under this section if the subcontractor is satisfactorily performing under his contract with the contractor. The subcontractor shall pay all suppliers, sub-subcontractors, laborers, and any other persons who provide goods, materials, labor, or equipment to the subcontractor any amounts actually received which were included in the subcontractor’s request for payment to the contractor for such persons, in the same manner set forth in this subsection (2) regarding payments by the contractor to the subcontractor. If the subcontractor fails to make such payments in the required manner, the subcontractor shall pay said suppliers, sub-subcontractors, and laborers interest in the same manner set forth in this subsection (2) regarding payments by the contractor to the subcontractor. At the time the subcontractor submits a request for payment to the contractor, the subcontractor shall also submit to the contractor a list of the subcontractor’s suppliers, sub-subcontractors, and laborers. The contractor shall be relieved of the requirements of this subsection (2) regarding payment in seven days and interest payment until the subcontractor submits such list. If the contractor fails to make timely payments to the subcontractor as required by this section, the contractor shall pay the subcontractor interest as specified by contract or at the rate of fifteen percent per annum whichever is higher, on the amount of the payment which was not made in a timely manner. The interest shall accrue for the period from the required payment date to the date on which payment is made. Nothing in this subsection (2) shall be construed to affect the retention provisions of any contract.

(3) (Deleted by amendment, L. 2011, (HB 11-1115), ch. 211, p. 912, §2, effective August 10, 2011.)

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§ 24-91-105. Withdrawal by contractor of sums withheld - security deposit required

The contractor under any contract exceeding one hundred fifty thousand dollars made or awarded by any public entity, pursuant to which sums are withheld to assure satisfactory performance of the contract, may withdraw the whole or any portion of the said sums withheld if the contractor deposits acceptable securities with the public entity. The contractor shall take such actions as the public entity may require to transfer the securities or a limited interest in the securities, including a security interest, and to authorize the public entity to negotiate the acceptable securities and to receive the payments due the public entity pursuant to law or the terms of the contract, and, to the extent there are excess funds resulting from said negotiation, the balance shall be returned to the contractor. Such acceptable securities so deposited at all times shall have a market value at least equal in value to the amount so withdrawn. If at any time a public entity determines that the market value of the acceptable securities theretofore deposited has fallen below the amount so withdrawn, the public entity shall give notice thereof to the contractor, who forthwith shall deposit additional acceptable securities in an amount sufficient to reestablish a total deposit of securities equal in value to the amount so withdrawn.

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§ 24-91-108. Retained payments - amount deducted by public entity

Any amount deducted by a public entity, pursuant to law or the terms of a contract, from the retained payments otherwise due to the contractor thereunder shall be deducted first from that portion of the retained payments for which no acceptable securities have been substituted and then from the proceeds of any deposited acceptable securities, in which case, the contractor shall be entitled to receive the interest, coupons, or income only from those acceptable securities which remain on deposit after such amount has been deducted.

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Colorado Retainage FAQs
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Colorado Retainage FAQs
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§ 24-91-109. Retained payments - disbursement

All retained payments and interest thereon disbursed to any contractor under any contract with a public entity covered under this article shall be disbursed to each subcontractor by the contractor. The disbursement of such retained payments and interest shall be in proportion to the respective amounts of retained payments, if any, which the contractor theretofore has withheld from his subcontractors if the subcontractor has performed under his contract with the contractor.

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Colorado Retainage FAQs
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Colorado Retainage FAQs
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