Michigan Retainage Requirements
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Retainage Limit
Not Regulated by State Law
Pay Period
Not Regulated by State Law
There's No Process to Recover
N/A
Not Held In Escrow
In Michigan, contractors and owners do not need to hold retainage funds in a separate escrow account.
10 Percent
Retainage cannot exceed 10%. But once the project reaches 50% completion, if satisfactory progress is being made, no more retainage will be withheld.
Pay Period
At any time after 94% of work under the contract is completed, the contractor can submit an irrevocable letter of credit for the release. if not, retainage will be released 30 days after final approval.
There's No Process to Recover
N/A
Retainage Held in Escrow
Retainage must be held in escrow by the public entity, with the interest accrued payable to the contractor.
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:
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- 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 Michigan’s retainage requirements.
Michigan’s retainage limits and deadlines
Michigan’s retainage statutes only apply to public works projects. On all other projects, such as commercial and residential projects, the terms of the contract will dictate the retainage withheld from payments.
The public project retainage laws in Michigan apply to most projects over $30K that provides for at least 4 progress payments. The amount that can be withheld is capped at no more than 10% of each progress payment. However, once the project reaches 50% completion, no more retainage can be withheld; unless the entity deems that satisfactory progress isn’t being achieved.
Also, upon 94% completion, the contractor may request the release of retainage in exchange for an irrevocable letter of credit in the amount withheld. If not, then retainage should typically be released by the public entity within 30 days of acceptance by the architect or engineer.
