Maryland Retainage Guide and FAQs

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Maryland Retainage FAQs

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Maryland Retainage Requirements


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Retainage 5% Icon
5 Percent

On a project that is 100% bonded, retainage cannot exceed 5%.


Payment-Period-90-Days-Icon
90 Day Pay Period

The property owner shall release any retainage within 90 days after the date of substantial completion.


NO
PROCESS
There is no Process to Recover

N/A


No Escrow Icon
Not Held In Escrow

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

Retainage 5% Icon
5 Percent

On a project that is 100% bonded, retainage cannot exceed 5%.


120
DAYS
120 Day Pay Period

The public entity shall release any retainage within 120 days after satisfactory completion of the contract. If there is a dispute, the 120 day period starts after the resolution of the dispute or contract claim.


YES
PROCESS
There is a Process to Recover

Yes, claim must be filed within 1 year of acceptance of work.

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

Maryland Retainage Frequently Asked Questions

Maryland Retainage Private Projects FAQs

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

Maximum retainage on a 100% bonded project is 5%. Contractors and subcontractors are allowed to withhold retainage only in the same percentage that has been withheld by the property owner. Retainage may be withheld longer if it’s reasonably determined that the performance under the contract provides reasonable grounds for withholding an additional amount.

However, these regulations do not apply to (1) contracts less than $100,000, or (2) projects funded in whole or in part by the Department of Housing and Community Development.

How long can a party withhold retainage in Maryland?

The property owner shall release retainage within 90 days after the date of substantial completion as defined in the contract or subcontract.

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

This is not specified in Maryland’s retainage statute.

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

This is not specified in Maryland’s retainage statute.

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

This is not specified in Maryland’s retainage statute.

Maryland Retainage Public Projects FAQs

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

Maximum retainage on a 100% bonded project is 5%.  The public entity is entitled to withhold any amount the unit believes necessary to protect the state’s interest. Contractors and subcontractors are allowed to withhold retainage only in the same percentage that has been withheld by the public entity unless it determines that the subcontractor’s or sub-subcontractor’s performance provides reasonable grounds for an increased withholding percentage.

How long can a party withhold retainage in Maryland?

The public entity shall release any retainage due to contractor within 120 days after satisfactory completion of a contract for construction. If there is a dispute, the 120 day period starts after the resolution of the dispute or contract claim.

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

This is not specified in Maryland’s retainage statute.

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

Claim must be filed within 1 year after the public body finally accepts the work performed under the contract.

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

This is not specified in Maryland’s retainage statute.

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Maryland Retainage Statutes

Getting informed about prompt payment laws is important. An examination of Maryland’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. Maryland’s specific laws can be found in: MD. Code, Real. Prop. §9-304, and MD. Code Ann. State Fin. & Proc. § 17-110, which are reproduced below.

Retainage Statute on Private Projects

§9-304

(a) In this section, “retention proceeds” means money earned but retained under the terms of a contract or subcontract:

(1) By an owner to guarantee performance of the contract by a contractor;

(2) By a contractor to guarantee performance of a subcontract by a subcontractor; or

(3) By a subcontractor to guarantee performance of a subcontract by another subcontractor.

(b) This section does not apply to:

(1) A contract in an amount less than $100,000; or

(2) A contract or subcontract for a project funded wholly or in part by or through the Department of Housing and Community Development.

(c) Except as provided in this section:

(1) If a contractor has furnished 100% security to guarantee the performance of a contract and 100% security to guarantee payment for labor and materials, including leased equipment:

(i) The retention proceeds under the terms of a contract may not exceed 5% of the contract price; and

(ii) The retention proceeds of any payment due under the terms of a contract from an owner to a contractor may not exceed 5% of the payment;

(2) The retention proceeds of any payment due under the terms of a contract from a contractor to a subcontractor may not exceed the percentage of retention proceeds from the owner to the contractor; and

(3) The retention proceeds of any payment due under the terms of a contract from a subcontractor to another subcontractor may not exceed the percentage of retention proceeds from the contractor to the subcontractor.

(d) This section may not be construed to prohibit the withholding of any amount due:

(1) From the owner to the contractor if the owner reasonably determines that the contractor’s performance under the contract provides reasonable grounds for withholding the additional amount;

(2) From the contractor to any subcontractor if the contractor reasonably determines that the subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount; or

(3) From a subcontractor to another subcontractor if the subcontractor determines that the other subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount.

(e) Undisputed retention proceeds retained by an owner under this section shall be paid within 90 days after the date of substantial completion, as defined by the applicable contract or subcontract.

Retainage Statute on Public Projects

§ 17-110: Retention of Percentage of Total Amount of Contract as Security

(a) Applicability of subsections (b)(1) and (2), (c) and (d). —  Subsections (b)(1) and (2), (c), and (d) of this section do not apply to an entity that is required to comply with the provisions of § 13-225 of this article.

(b) In general. 

(1)  If a contractor has furnished 100% payment security and 100% performance security in accordance with this subtitle under a contract for construction awarded by a public body, the percentage specified in the contract for retainage may not exceed 5% of the total amount of the contract.

(2)  In addition to retainage, a public body may withhold from payments otherwise due a contractor any amount that the public body reasonably believes necessary to protect the public body’s interest.

(3)  Except as provided in paragraph (4) of this subsection, within 120 days after satisfactory completion of a contract for construction, a public body shall release any retainage due to the contractor.

(4)  If there is a dispute or contract claim between the contractor and the public body concerning the satisfactory completion of a contract for construction, the public body shall release the retainage to the contractor within 120 days after the resolution of the dispute or contract claim.

(c) Retention of payments due a subcontrator.

(1)  A contractor may not retain a percentage of payments due a subcontractor that exceeds the percentage of payments retained by the public body.

(2)  Paragraph (1) of this subsection may not be construed to prohibit a contractor from withholding any amount in addition to retainage if the contractor determines that a subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount.

(d) Retention of payments due a lower tier subcontractor.

(1)  A subcontractor may not retain a percentage of payments due a lower tier subcontractor that exceeds the percentage of payments retained from the subcontractor.

(2)  Paragraph (1) of this subsection may not be construed to prohibit a subcontractor from withholding any amount in addition to retainage if the subcontractor determines that a lower tier subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount.

(e) Construction.  This section may not be construed to limit the application of the remaining provisions of this subtitle.

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