New York Retainage Guide and FAQs

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New York Retainage FAQs

New York Retainage Overview

New York Retainage Requirements


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Reasonable Amount of Retainage Icon
Retainage Limit

Retainage is set by contractual agreement and is only allowed if reasonable.


Payment Period 30 Days Icon
30 Day Pay Period

Retainage amounts must be released within 30 days after final approval of the work.


Mechanics Lien Form
Retainage Liens

New York specifically allows for a lien on retainage funds, which must be filed within 90 days of retainage becoming due.


No Escrow Icon
Not Held In Escrow

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

Retainage 5% Icon
5 Percent

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%.


Payment Period 45 Days Icon
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
PROCESS
No Specific Process to Recover

Not specified

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.

Private projects

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.

Public projects

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.

New York Retainage Frequently Asked Questions

New York Retainage Private Projects FAQs

What types of private projects are governed by New York’s retainage laws?

New York’s retainage laws apply to all private construction projects where the aggregate cost is $150K or more; with a few exceptions. These regulations do not apply to specific types of residential projects, such as:

• 3-family or fewer residential dwellings

• Tract development of 100 or less 1-3 family residential properties

• Residential projects where aggregate size is 4,500 sq. ft or less

Residential projects of 75 units or fewer that receive government financial assistance for subsidized housing

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

The amount of retainage that can be withheld on private construction projects must be a “reasonable amount” through mutual agreement of the parties. Furthermore, retainage withheld from a subcontractor or supplier cannot exceed the amount withheld by the property owner from the prime contractor.

How long can a party withhold retainage in New York?

Retainage shall be released by the property owner no later than 30 days after the final approval of the work under a construction contract. Once received, retainage should be released down the contracting chain within 7 days.

If the owner fails to release retainage as required, or the contractor or sub fails to release retainage after receipt shall be subject to interest at a rate of 1% a month on the retainage due.

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

New York does not require funds to be deposited in any special, interest-brewing account. Furthermore, the laws are silent on substitution of securities for retainage.

How can I make a claim to recover retainage in New York?

New York allows for a specific lien on retainage funds. This lien must be filed within 90 days after the date retainage was due to be released.

• Dive deeper: NY Lien Law: No More Losing Retainage Lien Rights

Is there a specific notice required to recover retainage in New York?

NY doesn’t require any specific notice to recover retainage through a lien or otherwise. Sending a Notice of Intent to Lien along with a prompt payment demand letter is a good place to start.

New York Retainage Public Projects FAQs

Does New York limit the amount of retainage that can be withheld from a contractor on public projects?

For retainage withheld by a public entity, if there is no requirement for the original contractor to provide performance/payment bond for full contract amount, retainage is limited to 10%. If there is such a requirement, the retainage rate is capped at 5%.

For retainage held by a contractor, the retainage rate is capped at 5% unless the subcontractor from whom the retainage is being withheld, prior to entering into the subcontract, is unable or unwilling to provide a bond in the full amount of the subcontract after specific request from the withholding party. In which case, the retainage rate is capped at 10%.

How long can a party withhold retainage in New York?

There is no specific deadline for the release of retainage. However, under NY Prompt Payment laws, final payment (which typically include retainage) is generally required to be released within 30 days from final approval of the work under the contract. The contractor shall pay subcontractors within 7 days of receipt of payment from the public owner.

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

Securities can be substituted for retainage. You can learn more at Retention Bonds: An Alternative to Waiting for Retainage.

Furthermore, the funds can be deposited in any sort of account/financial institution approved by the fiscal officer.

How can I make a claim to recover retainage in New York?

New York doesn’t specify how a claim for retainage can be made own public works projects. However, retainage can be included in a NY payment bond claim, as well as claims under the NY public works prompt payment laws. 

Is there a specific notice required to recover retainage in New York?

NY doesn’t require any specific notice to recover retainage on a public works project. Sending a Notice of Intent to Make a Bond Claim along with a prompt payment demand letter is a good place to start.

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New York Retainage Statutes

Getting informed about prompt payment laws is important. An examination of New York’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. New York’s specific laws can be found in: N.Y. General Business Law § 756-C, N.Y. State Finance Law § 139-f(1) and § 139-f(2), N.Y. General Municipal Law § 106-b(1) and § 106-b(2), and are reproduced below. Updated as of 2020.

Retainage Statute on Private Projects

§ 756-C. Retainage

By mutual agreement of the relevant parties an owner may retain a reasonable amount of the contract sum as retainage. A contractor or subcontractor may also retain a reasonable amount for retainage so long as the amount does not exceed the actual percentage retained by the owner. Retainage shall be released by the owner to the contractor no later than thirty days after the final approval of the work under a construction contract. In the event that an owner fails to release retainage as required by this article, or the contractor or subcontractor fails to release a proportionate amount of retainage to the relevant parties after receipt of retainage from the owner, the owner, contractor, or subcontractor, as the case may be, shall be subject to the payment of interest at the rate of one percent per month on the date retention was due and owing.

Retainage Statute on Public Projects

§ 139-f(1) & (2). Payment on public work projects

Notwithstanding the provisions of any other law to the contrary, except the provisions of section thirty-eight of the highway law, all contracts made and awarded by the state, or by any public department, or by any public benefit corporation or by any public corporation or official thereof, hereafter referred to as the public owner, for construction, reconstruction or alteration of any public work project shall provide for payment by the public owner to the contractor and payment by the contractor to the subcontractor in accordance with the following:

1. Payment by public owners to contractors. The contractor shall periodically, in accordance with the terms of the contract, submit to the public owner and/or his agent a requisition for a progress payment for the work performed and/or materials furnished to the date of the requisition, less any amount previously paid to the contractor. The public owner shall in accordance with the terms of the contract approve and promptly pay the requisition for the progress payment less an amount necessary to satisfy any claims, liens or judgments against the contractor which have not been suitably discharged and less any retained amount as hereafter described. The public owner shall retain not more than five per centum of each progress payment to the contractor except that the public owner may retain in excess of five per centum but not more than ten per centum of each progress payment to the contractor provided that there are no requirements by the public owner for the contractor to provide a performance bond and a labor and material bond both in the full amount of the contract. The public owner shall pay, upon requisition from the contractor, for materials pertinent to the project which have been delivered to the site or off-site by the contractor and/or subcontractor and suitably stored and secured as required by the public owner and the contractor provided, the public owner may limit such payment to materials in short and/or critical supply and materials specially fabricated for the project each as defined in the contract. When the work or major portions thereof as contemplated by the terms of the contract are substantially completed, the contractor shall submit to the public owner and/or his agent a requisition for payment of the remaining amount of the contract balance. Upon receipt of such requisition the public owner shall approve and promptly pay the remaining amount of the contract balance less two times the value of any remaining items to be completed and an amount necessary to satisfy any claims, liens or judgments against the contractor which have not been suitably discharged. As the remaining items of work are satisfactorily completed or corrected, the public owner shall promptly pay, upon receipt of a requisition, for these remaining items less an amount necessary to satisfy any claims, liens or judgments against the contractor which have not been suitably discharged. Any claims, liens and judgments referred to in this section shall pertain to the project and shall be filed in accordance with the terms of the applicable contract and/or applicable laws.

1-a. Notwithstanding any other provision of this section to the contrary, payment of the moneys due under a contract awarded (i) by a state agency as defined in article eleven-A of this chapter or (ii) by a corporation as defined in subdivision one of section twenty-eight hundred eighty of the public authorities law which is subject to the provision of this section shall be made in accordance with the provisions of such article eleven-A, in the case of such state agencies, or such section twenty-eight hundred eighty, in the case of such corporations, provided failure to make such payment, as heretofore prescribed, shall not be due to any fault, neglect, or omission on the part of the contractor or by reason of the filing of any lien, attachment, or other legal process against the money due such contractor.

2. Payment by contractors to subcontractors. Within seven calendar days of the receipt of any payment from the public owner, the contractor shall pay each of his subcontractors and materialmen the proceeds from the payment representing the value of the work performed and/or materials furnished by the subcontractor and/or materialman and reflecting the percentage of the subcontractor’s work completed or the materialman’s material supplied in the requisition approved by the owner and based upon the actual value of the subcontract or purchase order less an amount necessary to satisfy any claims, liens or judgments against the subcontractor or materialman which have not been suitably discharged and less any retained amount as hereafter described. Failure by the contractor to pay any subcontractor or materialman within seven calendar days of the receipt of any payment from the public owner shall result in the commencement and accrual of interest on amounts due to such subcontractor or materialman for the period beginning on the day immediately following the expiration of such seven calendar day period and ending on the date on which payment is made by the contractor to such subcontractor or materialman. Such interest payment shall be the sole responsibility of the contractor, and shall be paid at the rate of interest in effect on the date payment is made by the contractor. Notwithstanding any other provision of law to the contrary, interest shall be computed at the rate established in paragraph (b) of subdivision one of section seven hundred fifty-six-b of the general business law. The contractor shall retain not more than five per centum of each payment to the subcontractor and/or materialman except that the contractor may retain in excess of five per centum but not more than ten per centum of each payment to the subcontractor provided that prior to entering into a subcontract with the contractor, the subcontractor is unable or unwilling to provide a performance bond and a labor and material bond, both in the full amount of the subcontract, at the request of the contractor. However, the contractor shall retain nothing from those payments representing proceeds owed the subcontractor and/or materialman from the public owner’s payments to the contractor for the remaining amounts of the contract balance as provided in subdivision one of this section. If the contractor has failed to submit a requisition for payment of the remaining amounts of the contract balance within ninety days of substantial completion as provided in subdivision one of this section, then any clause in the subcontract between the contractor and the subcontractor or materialman which states that payment by the contractor to such subcontractor or materialman is contingent upon payment by the owner to the contractor shall be deemed invalid. Within seven calendar days of the receipt of payment from the contractor, the subcontractor and/or materialman shall pay each of his subcontractors and materialmen in the same manner as the contractor has paid the subcontractor, including interest as herein provided above. Nothing provided herein shall create any obligation on the part of the public owner to pay or to see to the payment of any moneys to any subcontractor or materialman from any contractor nor shall anything provided herein serve to create any relationship in contract or otherwise, implied or expressed, between the subcontractor or materialman and the public owner.

§ 106-B(1) & (2). Payment on public work projects

Notwithstanding the provisions of any other law to the contrary, all contracts made and awarded by the appropriate officer, board or agency of a political subdivision or of any district therein, hereafter referred to as the public owner, for construction, reconstruction or alteration of any public work project shall provide for payment by the public owner to the contractor and payment by the contractor to the subcontractor in accordance with the following:

1. Payment by public owners to contractors.

(a) The contractor shall periodically, in accordance with the terms of the contract, submit to the public owner and/or his agent a requisition for a progress payment for the work performed and/or materials furnished to the date of the requisition less any amount previously paid to the contractor. The public owner shall in accordance with the terms of the contract approve and promptly pay the requisition for the progress payment less an amount necessary to satisfy any claims, liens or judgments against the contractor which have not been suitably discharged and less any retained amount as hereafter described. The public owner shall retain not more than five per centum of each progress payment to the contractor except that the public owner may retain in excess of five per centum but not more than ten per centum of each progress payment to the contractor provided that there are no requirements by the public owner for the contractor to provide a performance bond and a labor and material bond both in the full amount of the contract. The public owner shall pay, upon requisition from the contractor, for materials pertinent to the project which have been delivered to the site or off-site by the contractor and/or subcontractor and suitably stored and secured as required by the public owner and the contractor provided, the public owner may limit such payment to materials in short and/or critical supply and materials specially fabricated for the project each as defined in the contract. When the work or major portions thereof as contemplated by the terms of the contract are substantially completed, the contractor shall submit to the public owner and/or his agent a requisition for payment of the remaining amount of the contract balance. Upon receipt of such requisition the public owner shall approve and promptly pay the remaining amount of the contract balance less two times the value of any remaining items to be completed and an amount necessary to satisfy any claims, liens or judgments against the contractor which have not been suitably discharged. As the remaining items of work are satisfactorily completed or corrected, the public owner shall promptly pay, upon receipt of a requisition, for these items less an amount necessary to satisfy any claims, liens or judgments against the contractor which have not been suitably discharged. Any claims, liens and judgments referred to in this section shall pertain to the project and shall be filed in accordance with the terms of the applicable contract and/or applicable laws. Where the public owner is other than the city of New York, the term “promptly pay” shall mean payment within thirty days, excluding legal holidays, of receipt of the requisition unless such requisition is not approvable in accordance with the terms of the contract. Notwithstanding the foregoing, where the public owner is other than the city of New York and is a municipal corporation which requires an elected official to approve progress payments, “promptly pay” shall mean payment within forty-five days, excluding legal holidays, of receipt of the requisition unless such requisition is not approvable in accordance with the terms of the contract.

(b) Each public owner other than the city of New York which is required to make a payment from public funds pursuant to a contract and which does not make such contract payment by the required payment date shall make an interest payment to the contractor on the amount of the contract payment which is due unless failure to make such contract payment is the result of a lien, attachment, or other legal process against the money due said contractor, or unless the amount of the interest payment as computed in accordance with the provisions set forth hereinafter is less than ten dollars. Interest payments on amounts due to a contractor pursuant to this paragraph shall be paid to the contractor for the period beginning on the day after the required payment date and ending on the payment date for those payments required according to this section and shall be paid at the rate of interest in effect on the date when the interest payment is made. Notwithstanding any other provision of law to the contrary, interest shall be computed at the rate equal to the overpayment rate set by the commissioner of taxation and finance pursuant to subsection (e) of section one thousand ninety-six of the tax law. A pro rata share of such interest shall be paid by the contractor or subcontractor, as the case may be, to subcontractors and materialmen in a proportion equal to the percentage of their pro rata share of the contract payment. Such pro rata share of interest shall be due to such subcontractors and materialmen only for those payments which are not paid to such subcontractors and materialmen prior to the date upon which interest begins to accrue between the public owner and the contractor. Such pro rata shares of interest shall be computed daily until such payments are made to the subcontractors and materialmen.

(c) For projects of a public owner other than the city of New York, if state funds directly related to and which have been budgeted for the construction of the project for which the payment is due have not been received prior to the expiration of the thirty or forty-five days specified in paragraph (a) of this subdivision, the interest provided for in paragraph (b) of this subdivision shall not begin to accrue and payment shall not be due, until ten days after receipt of the state funds. Nothing in this paragraph shall prevent the public owner from approving the requisition, subject to receipt of the state funds. State funds shall mean monies provided to the public owner by the state, its officers, boards, departments, commissions, or a public authority and public benefit corporation, a majority of the members of which have been appointed by the governor or who serve as members by virtue of holding a civil office of the state, or a combination thereof.

2. Payment by contractors to subcontractors. Within seven calendar days of the receipt of any payment from the public owner, the contractor shall pay each of his subcontractors and materialmen the proceeds from the payment representing the value of the work performed and/or materials furnished by the subcontractor and/or materialman and reflecting the percentage of the subcontractor’s work completed or the materialman’s material supplied in the requisition approved by the owner and based upon the actual value of the subcontract or purchase order less an amount necessary to satisfy any claims, liens or judgments against the subcontractor or materialman which have not been suitably discharged and less any retained amount as hereafter described. Failure by the contractor to make any payment, including any remaining amounts of the contract balance as hereinafter described, to any subcontractor or materialman within seven calendar days of the receipt of any payment from the public owner shall result in the commencement and accrual of interest on amounts due to such subcontractor or materialman for the period beginning on the day immediately following the expiration of such seven calendar day period and ending on the date on which payment is made by the contractor to such subcontractor or materialman. Such interest shall be the sole responsibility of the contractor, and shall be paid at the rate of interest in effect on the date payment is made by the contractor. Notwithstanding any other provision of law to the contrary, interest shall be computed at the rate established in paragraph (b) of subdivision one of section seven hundred fifty-six-b of the general business law. The contractor shall retain not more than five per centum of each payment to the subcontractor and/or materialman except that the contractor may retain in excess of five per centum but not more than ten per centum of each payment to the subcontractor provided that prior to entering into a subcontract with the contractor, the subcontractor is unable or unwilling to provide a performance bond and a labor and material bond both in the full amount of the subcontract at the request of the contractor. However, the contractor shall retain nothing from those payments representing proceeds owed the subcontractor and/or materialman from the public owner’s payments to the contractor for the remaining amounts of the contract balance as provided in subdivision one of this section. If the contractor has failed to submit a requisition for payment of the remaining amounts of the contract balance within ninety days of substantial completion as provided in subdivision one of this section, then any clause in the subcontract between the contractor and the subcontractor or materialman which states that payment by the contractor to such subcontractor or materialman is contingent upon payment by the owner to the contractor shall be deemed invalid. Within seven calendar days of the receipt of payment from the contractor, the subcontractor and/or materialman shall pay each of his subcontractors and materialmen in the same manner as the contractor has paid the subcontractor, including interest as herein provided above. Nothing provided herein shall create any obligation on the part of the public owner to pay or to see to the payment of any moneys to any subcontractor or materialman from any contractor nor shall anything provided herein serve to create any relationship in contract or otherwise, implied or expressed, between the subcontractor or materialman and the public owner.

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