New York Retainage Requirements
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Retainage is set by contractual agreement and is only allowed if reasonable.
30 Day Pay Period
Retainage amounts must be released within 30 days after final approval of the work.
New York specifically allows for a lien on retainage funds, which must be filed within 90 days of retainage becoming due.
Not Held In Escrow
In New York, contractors and owners do not need to hold retainage funds in a separate escrow account.
If payment and performance bonds are required from the prime contractor, retainage is capped at 5%. If not, retainage cannot exceed 10%. Contractors' retainage from subs cannot exceed 5%, unless the subcontractor is unable or unwilling to provide bonds. Then, retainage cannot exceed 10%.
45 Day Pay Period
Retainage must be released by public owner to contractor within 45 days of receipt of the requisition unless not approvable. For the city of New York, this is cut to 30 days. When retainage is released, contractors and subcontractors must release retainage within 7 days of receiving payment.
No Specific Process to Recover
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 New York’s retainage requirements.
New York retainage limits and deadlines
New York has multiple statutes that govern retainage on construction projects, both private and public.
There is no specific cap on how much retainage can be withheld on private projects. Therefore retainage will be limited according to the terms of the contract. As far as the timing of release, final payments, including retainage, to the GC should be made within 30 days of final approval. Once received, retain should be released to a contractor’s subs and suppliers within 7 days. Failure to timely release retainage will impose liability for interest at a rate of 1% a month until payment is made.
On public projects in New York, retainage that can be withheld by the contracting entity is typically 10%. However, if a payment and/or performance bond is required, then the retainage is capped at just 5%. For subcontractors, retainage is limited to 5% unless the sub is requested to post a bond and wither refuses or is unable to; then 10% can be withheld. Similar to private projects, retainage should be released by the entity within 30 days of final approval, and then released down the contracting chain within 7 days of receipt.