Georgia Retainage Guide and FAQs

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Georgia Retainage FAQs

Georgia Retainage Overview

Georgia Retainage Requirements


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Reasonable Amount of Retainage Icon
Retainage Limits

Must be "reasonable" and is set by contract between owner and GC


10 Day Pay Period

An owner may withhold payment as long as one of the prescribed reasons still exist (see FAQ). A contractor must disburse funds to subs within 10 days of receipt.


YES
PROCESS
There is a Process to Recover

As set forth by contract.


No Escrow Icon
Not Held In Escrow

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

10 Percent

Retainage cannot exceed 10% of each progress payment.


Payment Period 30 Days Icon
30 Day Pay Period

After substantial completion, the public entity must release the retained amount within 30 days of receiving contractor's invoice. However, the public entity may withhold 200% of the value of any incomplete items, to be released upon the specific item’s completion. Contractor and subs must release retainage down the chain witin 30 days of receiving retainage payments.


YES
PROCESS
There is a Process to Recover

Yes, certification from engineer that work is completed satisfactorily is required.

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 Georgia’s retainage requirements. The Georgia retainage statutes are reproduced below on this page.

Georgia Retainage Frequently Asked Questions

Georgia Retainage Private Projects FAQs

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

Georgia law limits the amount of retainage that can be withheld to a “reasonable amount” determined in the contract.

How long can a party withhold retainage in Georgia?

An owner may withhold retainage as long as one of the following exists: unsatisfactory job progress; defective construction which has not been remedied; disputed work; third-party claims filed or reasonable evidence that a claim will be filed; failure of the contractor or its subcontractor to make timely payments for labor, equipment, and materials; damage caused by the contractor to the owner, other contractors, or subcontractors; or reasonable evidence that the contract cannot be completed for the unpaid balance of the contract sum.

A contractor or subcontractor may withhold payment for the same reasons, but any retained amounts by the owner must be disbursed to the lower tier parties within 10 days of receipt. Remember that the majority of retainage terms on private projects is determined by contract.

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

Retainage on private projects is not highly regulated by Georgia law. Your contract will most likely determine the answer to these questions.

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

Once again, your contract should determine how you can recover retainage.

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

This is not specified by the Georgia retainge statute. Your contract should determine how you can recover retainage.

Georgia Retainage Public Projects FAQs

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

Maximum retainage rate is 10% of each progress payment. Once a project is 50% complete, retainage must be eliminated if progress is satisfactory (if progress is unsatisfactory, retainage may be reinstated at the previous level). Same limits apply to retainage by contractor to subcontractors. The Department of Transportation may withhold retainage pursuant to appropriate clauses included in the contract.

How long can a party withhold retainage in Georgia?

After substantial completion of the project, the public entity must release the retained amount within 30 days of receipt of invoice. However, the public entity may withhold 200% of the value of any incomplete items, to be released upon the specific item’s completion. The contractor (and subcontractors), within 30 days of receipt of retainage, must pass payments to subcontractors in which payment is due.

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

An alternate procedure for an escrow account equal to the amount retained may be authorized by the public entity to substitute for retainage funds.

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

This is not specified in Georgia’s retainage statute for public projects.

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

Certification by the engineer that work has been satisfactorily completed is required in order to recover retainage.

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Georgia Retainage
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50% retention in GA

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Georgia Retainage Statute FAQs

Getting informed about prompt payment laws is important. An examination of Georgia’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. Georgia’s specific laws can be found in: Ga. Code Ann. §§13-11-5, 13-11-6, 13-10-80(b)(2)(A), 13-10-80(b)(2)(C), §§13-10-81, 32-2-75, and 32-2-76, and are reproduced below.

Retainage Statute on Private Projects

§ 13-11-5. Withholding of payments and grounds therefor

(a) Nothing in this chapter shall prevent the owner from withholding payment to its contractor because of the following: unsatisfactory job progress; defective construction which has not been remedied; disputed work; third-party claims filed or reasonable evidence that a claim will be filed; failure of the contractor or its subcontractor to make timely payments for labor, equipment, and materials; damage caused by the contractor to the owner, other contractors, or subcontractors; or reasonable evidence that the contract cannot be completed for the unpaid balance of the contract sum. In addition to the other bases for withholding set forth in this subsection, the owner may withhold a reasonable amount for retainage, provided that the retainage withheld by the owner shall not exceed the retainage percentage set forth in the contract between the contractor and the owner.

(b) Nothing in this chapter shall prevent the contractor or a subcontractor from withholding payment to a subcontractor for: unsatisfactory job progress; defective construction which has not been remedied; disputed work; third-party claims filed or reasonable evidence that a claim will be filed; failure of the subcontractor to make timely payments for labor, equipment, and materials; damage caused by the subcontractor to the owner, the contractor, or contractors or subcontractors; or reasonable evidence that the subcontract cannot be completed for the unpaid balance of the subcontract sum. In addition to the other bases for withholding set forth in this subsection, the contractor or the subcontractor, as the case may be, may withhold a reasonable amount for retainage, provided that the retainage withheld shall not exceed the percentage retained from the contractor by the owner on account of the subcontractor’s work.

§ 13-11-6. Pass through of payments from owner by contractor to subcontractor

The contractor shall, within ten days from the contractor’s receipt of retainage from the owner, pass through payments to subcontractors and shall reduce each subcontractor’s retainage in the same manner as the contractor’s retainage is reduced by the owner, provided that the value of the subcontractor’s work complete and in place equals 50 percent of his or her subcontract value, including approved change orders and other additions to the subcontract value and, provided, further, that the work of the subcontractor is proceeding satisfactorily and, provided, further, that the subcontractor has provided or provides such satisfactory reasonable assurances of continued performance and financial responsibility to complete his or her work as the contractor in his or her reasonable discretion may require, including but not limited to a payment and performance bond.

Retainage Statute on Public Projects

§ 13-10-80(b)(2)(A): Progress Payments to be Made to Contractors on Periodic Basis

(b) In any public works construction contract entered into on or after July 1, 2001, with an owner, as defined in paragraph (3) of subsection (a) of this Code section, such contract shall provide for the following:

(2)(A) Retainage to a maximum of 10 percent of each progress payment; provided, however, when 50 percent of the contract value including change orders and other additions to the contract value provided for by the contract documents is due and the manner of completion of the contract work and its progress are reasonably satisfactory to the owner’s authorized contract representative, the owner shall withhold no more retainage. At the discretion of the owner and with the approval of the contractor, the retainage of each subcontractor may be released separately as the subcontractor completes his or her work.

§13-10-80(b)(2)(C):

(b) In any public works construction contract entered into on or after July 1, 2001, with an owner, as defined in paragraph (3) of subsection (a) of this Code section, such contract shall provide for the following:

(2)(C) At substantial completion of the work or such other standard of completion as may be provided in the contract documents and as the owner’s authorized contract representative determines the work to be reasonably satisfactory, the owner shall, within 30 days after invoice and other appropriate documentation as may be required by the contract documents are provided, pay the retainage to the contractor. If at that time there are any remaining incomplete minor items, an amount equal to 200 percent of the value of each item as determined by the owner’s authorized contract representative shall be withheld until such item or items are completed. The reduced retainage shall be shared by the contractor and subcontractors as their interests may appear.

§13-10-81: Retained Amounts on Water and Sewer Contracts; Procedure for Payment

(a) Any department, agency, or instrumentality of the state or any political subdivision of the state is authorized to insert in the specifications of all contracts relating to the installation, extension, improvement, maintenance, or repair of any water or sewer facility a clause providing for the retention of amounts not exceeding 10 percent of the gross value of the completed work as may be provided for in the contract; provided, however, that no amounts shall be retained on estimates or progress payments submitted after 50 percent of the work on the project has been completed if in the opinion of the department, agency, or instrumentality of the state or any political subdivision thereof such work is satisfactory and has been completed on schedule. This will not affect the retained amounts on the first 50 percent of the work on the project which may continue to be held to ensure satisfactory completion of the project. If, after discontinuing the retention, the department, agency, or instrumentality of the state or any political subdivision thereof determines that the work is unsatisfactory or has fallen behind schedule, retention may be resumed at the previous level. Retainage shall be invested at the current market rate and any interest earned on the retained amount by such department, agency, or instrumentality of the state or any political subdivision of the state shall be paid to the contractor when the project has been completed within the time limits specified and for the price specified in the contract, or in any amendments or change orders approved in accord with the terms of the contract, as certified pursuant to subsection (b) of this Code section.

(b) Final payment of the retained amounts to the contractor under the contract to which the retained amounts relate shall be made after certification by the engineer in charge of the project covered by the contract that the work has been satisfactorily completed and is accepted in accordance with the contract, plans, and specifications. Payment to the contractor of interest earned on the retained amounts shall be made after certification by the engineer in charge of the project covered by the contract that the work has been completed within the time specified and within the price specified in the contract.

(c) At substantial completion of the work and as the governmental entity’s authorized contract representative determines the work to be reasonably satisfactory, the governmental entity shall within 30 days after invoice and other appropriate documentation as may be required by the contract documents are provided pay the retainage to the contractor. If at that time there are any remaining incomplete minor items, an amount equal to 200 percent of the value of each item as determined by the governmental entity’s authorized contract representative shall be withheld until such item or items are completed.

§13-10-82: Alternate Escrow Procedure; Liability of Escrow Agent

(a) In lieu of the retained amounts provided for in Code Section 13-10-81, any department, agency, or instrumentality of the state or any political subdivision of the state is authorized to insert a clause in the specifications of all contracts provided for in Code Section 13-10-81, providing for an alternate procedure for the maintenance of an escrow account in an amount at least equal to the amount authorized to be retained by the contract.

(b) Any such escrow agreement entered into pursuant to this Code section must contain as a minimum the following provisions:

(1) Only state or national banks chartered within the State of Georgia may serve as an escrow agent;

(2) The escrow agent must limit the investment of funds of the contractor held in escrow in lieu of retained amounts provided for in Code Section 13-10-81 to negotiable certificates of deposits issued by any state or national bank in the State of Georgia (including, but not limited to, certificates of deposit issued by the bank acting as escrow agent) registered in the name of the escrow agent as such under escrow agreement with the contractor;

(3) As interest on certificates of deposit held in escrow becomes due, it shall be collected by the escrow agent and paid to the contractor;

(4) The escrow agent shall promptly acknowledge to the appropriate fiscal officer the amount and value of the escrow account held by the escrow agent, and any additions to the escrow account shall be reported immediately. Withdrawals from the escrow account shall only be made subject to the written approval of the fiscal officer of the department, agency, or instrumentality of the state or any political subdivision entering into the contract;

(5) Upon default or overpayment of any contract subject to the procedure provided for in this Code section and upon the written demand of the fiscal officer provided for in paragraph (4) of this subsection, the escrow agent shall within ten days deliver a certified check to the appropriate fiscal officer in the amount of the escrow account balance relating to the contract in default;

(6) The escrow account may be terminated upon completion and acceptance of the contract as provided for in Code Section 13-10-81;

(7) All fees and expenses of the escrow agent shall be paid by the contractor to the escrow agent and, if not paid, shall constitute a lien on the interest accruing to the escrow account and shall be paid therefrom;

(8) The escrow account shall constitute a specific pledge to the state or any political subdivision and the contractor shall not, except to his or her surety, otherwise assign, pledge, discount, sell, or transfer his or her interest in said escrow account, the funds of which shall not be subject to levy, garnishment, attachment, or any other process whatsoever; and

(9) The form of the escrow agreement and provisions thereof in compliance with this Code section, as well as such other provisions as the appropriate fiscal officer shall from time to time prescribe, shall be subject to written approval of the fiscal officer. The approval of the escrow agreement by the appropriate fiscal officer shall authorize the escrow agent to accept appointment in such capacity.

(c) The department, agency, or instrumentality of the state or political subdivision of this state shall not be liable to the contractor or his or her surety for the failure of the escrow agent to perform under the escrow agreement or for the failure of any bank to honor certificates of deposit issued by it which are held in the escrow account.

§ 32-2-75: Road Construction Contracts to Provide Retained Amounts; Definitions; Retainage Clause

(a) As used in this Code section and Code Sections 32-2-76 and 32-2-77, the term:

(1) ‘Engineer’ means the chief engineer or the engineer designated by the Georgia Highway Authority or the State Road and Tollway Authority.
(2) ‘Escrow account’ means the certificates of deposit issued by a state or national bank in Georgia and any uninvested cash held in escrow.
(3) ‘State’ means the Department of Transportation, the Georgia Highway Authority, or the State Road and Tollway Authority.
(4) ‘Treasurer’ means the treasurer of the Department of Transportation, the treasurer of the Georgia Highway Authority, or the treasurer of the State Road and Tollway Authority.

(b) The state is authorized to insert a clause in the specifications of all contracts let and awarded as a result of public lettings for the construction, improvement, maintenance, or repair of any road, highway, bridge, or appurtenance thereto providing for the retainage of amounts constituting a percentage of the gross value of the completed work as may be provided for in the contract.

(c) Final payment of the retained amounts to the contractor under the contract to which the retained amount relates will be made after certification by the engineer that the work has been satisfactorily completed and is accepted in accordance with the contract, plans, and specifications.

§ 32-2-76. Escrow account as alternate procedure

(a) In lieu of the retained amounts provided for in Code Section 32-2-75, the state is authorized to insert a clause in the specifications of all contracts let and awarded as a result of public lettings for the construction, improvement, maintenance, or repair of any road, highway, bridge, or appurtenance thereto providing for the maintenance of an escrow account in an amount at least equal to the amount of the retainage authorized by the contract, in accordance with such rules and regulations as are authorized to be promulgated by the state.

(b) Any such escrow agreement entered into pursuant to this Code section must contain as a minimum the following provisions:

(1) Only state or national banks chartered within this state may serve as an escrow agent;

(2) The escrow agent must limit the investment of funds of the contractor held in escrow in lieu of retained amounts provided for in Code Section 32-2-75 to negotiable certificates of deposits issued by any state or national bank in this state, including but not limited to certificates of deposit issued by the bank acting as escrow agent, registered in the name of the escrow agent as such under escrow agreement with the contractor;

(3) As interest on certificates of deposits held in escrow becomes due, it shall be collected by the escrow agent and paid to the contractor;

(4) The escrow agent shall promptly acknowledge to the treasurer of the department or the appropriate authority the amount and value of the escrow account held by the escrow agent, and any additions to the escrow account shall be reported immediately. Withdrawals from the escrow account shall only be made subject to the written approval of the treasurer of the department or the appropriate authority;

(5) Upon default or overpayment, as determined by the state, of any contract subject to this procedure and upon the written demand of the treasurer of the department or the appropriate authority, the escrow agent shall within ten days deliver a certified check to the treasurer of the department or the appropriate authority in the amount of the escrow account balance relating to the contract in default;

(6) The escrow account may be terminated upon completion and acceptance of the contract(s) as provided in Code Section 32-2-75;

(7) All fees and expenses of the escrow agent shall be paid by the contractor to the escrow agent and if not paid shall constitute a lien on the interest accruing to the escrow account and shall be paid therefrom;

(8) The escrow account shall constitute a specific pledge to the state, and the contractor shall not, except to his surety, otherwise assign, pledge, discount, sell, or transfer his interest in said escrow account, the funds in which shall not be subject to levy, garnishment, attachment, or any other process whatsoever; and

(9) The form of the escrow agreement and provisions thereof in compliance with this Code section as well as such other provisions as the treasurer of the department or the appropriate authority shall from time to time prescribe shall be subject to written approval of the treasurer of the department or the appropriate authority. The approval of the escrow agreement by the treasurer of the department or the appropriate authority shall authorize the escrow agent to accept appointment in such capacity.

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