Kentucky Retainage Requirements
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10% Retainage Limit
Retainage must not exceed 10% until 50% completion, after which, no more than 5% may be withheld.
30 Day Pay Period
Retainage funds must be released within 30 days after substantial completion of the project. If any work remains upon substantial completion, up to 200% of the amount of the remaining work may continue to be withheld as retainage.
There's No Process to Recover
Not specified
Not Held In Escrow
In Kentucky, contractors and owners do not need to hold retainage funds in a separate escrow account.
10 Percent
Retainage must not exceed 10% until 50% completion, after which, no more than 5% may be withheld.
30 Day Pay Period
Retainage funds must be released within 30 days after substantial completion of the project. If any work remains upon substantial completion, up to 200% of the amount of the remaining work may continue to be withheld as retainage.
There's No Process to Recover
Not specified
Not Held In Escrow
In Kentucky, contractors and owners do not need to hold retainage funds in a separate escrow account.
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 answers to frequently asked questions about Kentucky’s retainage requirements.
Kentucky’s retainage limits and deadlines
The Kentucky retainage statutes under the Kentucky Fairness in Construction Act, apply to both private and public projects; with the exception of residential projects and public utility projects.
The amount of retainage that may be withheld cannot exceed 10% of any undisputed payments due. However, upon 50% completion, the amount of retainage must be reduced to no more than 5% of the total contract amount.
When the project reaches substantial completion, retainage must be partially released within 30 days. Once received, retainage payments must be made to any subs and suppliers within 15 days. However, if there is remaining work to be completed, the contracting entity or contractor may withhold up to 200% of the reasonably estimated costs until the project is completed. The remainder of the retainage will be released based on the agreed-upon schedule to complete the project. Late payment of retainage will accrue interest at a rate of 12% per year until payment is made.
