Ohio Retainage Guide and FAQs

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Ohio Retainage FAQs

Ohio Retainage Overview

Ohio Retainage Requirements


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Retainage icon
Retainage Limit

For projects (other than residential projects of 1 to 3 detached dwelling houses), retainage is solely based on the contract between the parties.


Payment Period Icon
Pay Period

Determined by the terms of the contract.


YES
PROCESS
There is a Process to Recover

Solely set forth by contract.


No Escrow Icon
Not Held In Escrow

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

8%
8 Percent

Retainage cannot exceed 8%. After 50% completion of the project, no additional retainage is allowed.


Payment Period Icon
Pay Period

When the major portion of the project is substantially completed and occupied, or in use, or otherwise accepted, the public entity must release retainage within 30 days. Once received, retainage must be paid to subs and suppliers within 10 days.,


NO
PROCESS
There's No Process to Recover

Not specified


Escrow Icon
Held in Escrow

On projects over $15K, upon 50% completion, the retainage withheld must be deposited in an 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 Ohio’s retainage requirements.

Ohio retainage limits and deadlines

Illinois’s retainage statutes only apply to public works project. On all other projects, retainage will be governed by the terms of the contract.

On public construction projects (with the exception of residential projects of 12 units or fewer) the amount of retainage that can be withheld is 8% from each progress payment. Upon 50% completion, no more retainage may be withheld on the remaining progress payments. Also, on projects over $15K, upon 50% completion, the retained funds must be deposited in an escrow account.

The public entity must release any retainage withheld within 30 days of the project’s date of substantial completion or acceptance. Furthermore, once received, retainage must be released to subs and suppliers within 10 days under Ohio’s prompt payment laws. 

If the public entity doesn’t release retainage within the specified timeframe, or they fail to deposit retainage in an escrow account, interest will accrue at a rate of 8% per year; in addition to any late payment interest accrued under the prompt payment laws.

Ohio Retainage Frequently Asked Questions

Ohio Retainage Private Projects FAQs

What types of private projects are governed by the Ohio retainage laws?

Ohio does not regulate retainage practice on private construction projects. Therefore, retainage will be governed by the terms of the contract.

See: The Ultimate Guide to Retainage in the Construction Industry 

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

Although Ohio doesn’t regulate the amount of retainage that can be withheld on a private construction project, a prime contractor can only withhold retainage from their subs and suppliers if the owner is withholding retainage, and in the same amount.

How long can a party withhold retainage in Ohio?

There is no specific time in which retainage must be released by the property owner, so the contract will govern the timing. However, typically, retainage payments are made to the prime contractor once the project has reached substantial completion and all punch list work has been completed.

Furthermore, under Ohio’s prompt payment laws, once received, retainage should be released to subcontractors and suppliers within 10 calendar days, or a shorter period if specified in the contract.

Does Ohio require retained funds to be deposited in a specific account? Can securities be substituted for retainage?

The deposit of retained earnings in an escrow account will be governed by the terms of the contract. If retainage is being withheld on the project, the ability to substitute securities in lieu of retainage will also be governed by the contract.

For more on this, see: Retention Bonds: An Alternative to Waiting for Retainage

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

Claims for unpaid retainage will typically be included in an Ohio mechanics lien claim and/or under an Ohio Prompt Payment claim.

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

There are no specific notices required to recover unpaid retainage on private projects in Ohio. Sending a Notice of Intent to Lien and a Prompt Payment demand letter is a good start.

Keep in mind, that most claimants will need to send a Notice of Furnishing in order to be eligible for lien rights in Ohio.

Ohio Retainage Public Projects FAQs

What types of public projects are governed by the Ohio retainage laws?

The retainage laws in Ohio apply to all public works projects contracted by the state, county, township, municipal corporation, school district, political subdivision, or any public board, commission, authority or instrumentality authorized by the state.

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

Yes, public works contracts that are unit price or lump sum contracts are subject to 8% of retainage withheld from each progress payment. However, once the project reaches 50% completion, retainage may no longer be withheld from progress payments.

How long can a party withhold retainage in Ohio?

The public entity must release retainage within 30 days of the project’s substantial completion and occupation, in use, or otherwise accepted. Under the Ohio prompt payment laws, once received, retainage should be passed down to subs and suppliers within 10 days.

Does Ohio require retained funds to be deposited in a specific account? Can securities be substituted for retainage?

On public works projects with a total cost of $15,000 or more, once the project has reached 50% completion, the retained funds must be deposited in an interest bearing escrow account with the interest accruing to the contractor. The withheld retainage and the interest accrued must be paid to the contractor at the final completion and acceptance of the work.

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

There is no specific mechanism for making a claim for retainage under Ohio’s retainage laws. However, claims for unpaid retainage are typically included in public payment bond claims and claims under the Ohio prompt payment act.

Note, that any retainage unpaid or not deposited in an escrow account when required by the public entity will accrue interest at a rate of 8% per year, compounded daily. This interest is in addition to the interest penalties under Ohio’s public prompt payment laws.

See: Can I still receive my retainage 6 years later?

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

There are no specific notices required to recover unpaid retainage on public projects in Ohio. Sending a Notice of Intent to Make a Bond Claim and a Prompt Payment demand letter is a good start.

Keep in mind that most claimants will need to send some form of preliminary notice in order to make a public payment bond claim in Ohio.

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Ohio Retainage Statutes

Getting informed about prompt payment laws is important. An examination of Ohio’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. Ohio’s specific laws can be found in: Ohio Rev. Code §§ 153.12, 153.13, & 153.63 and are reproduced below. Updated as of 2020.

Retainage Statute on Private Projects

N/A

N/A

Retainage Statute on Public Projects

§ 153.12. Awarding and executing contract

(A) With respect to award of any contract for the construction, reconstruction, improvement, enlargement, alteration, repair, painting, or decoration of a public improvement made by the state, or any county, township, municipal corporation, school district, or other political subdivision, or any public board, commission, authority, instrumentality, or special purpose district of or in the state or a political subdivision or that is authorized by state law, the award, and execution of the contract, shall be made within sixty days after the date on which the bids are opened. The failure to award and execute the contract within sixty days invalidates the entire bid proceedings and all bids submitted, unless the time for awarding and executing the contract is extended by mutual consent of the owner or its representatives and the bidder whose bid the owner accepts and with respect to whom the owner subsequently awards and executes a contract. The public owners referred to in this section shall include, in the plans and specifications for the project for which bids are solicited, the estimate of cost. The bid for which the award is to be made shall be opened at the time and place named in the advertisement for bids, unless extended by the owner or its representative or unless, within seventy-two hours prior to the published time for the opening of bids, excluding Saturdays, Sundays, and legal holidays, any modification of the plans or specifications and estimates of cost for the project for which bids are solicited is issued and mailed or otherwise furnished to persons who have obtained plans or specifications for the project, for which the time for opening of bids shall be extended one week, with no further advertising of bids required. The contractor, upon request, is entitled to a notice to proceed with the work by the owner or its representative upon execution of the contract. No contract to which this section applies shall be entered into if the price of the contract, or, if the project involves multiple contracts where the total price of all contracts for the project, is in excess of ten per cent above the entire estimate thereof, nor shall the entire cost of the construction, reconstruction, repair, painting, decorating, improvement, alteration, addition, or installation, including changes and estimates of expenses for architects or engineers, exceed in the aggregate the amount authorized by law.

The unit or lump sum price stated in the contract shall be used in determining the amount to be paid and shall constitute full and final compensation for all the work.

Partial payment to the contractor for work performed under the lump sum price shall be based on a schedule prepared by the contractor and approved by the architect or engineer who shall apportion the lump sum price to the major components entering into or forming a part of the work under the lump sum price.

Partial payments to the contractor for labor performed under either a unit or lump sum price contract shall be made at the rate of ninety-two per cent of the estimates prepared by the contractor and approved by the architect or engineer. All labor performed after the job is fifty per cent completed shall be paid for at the rate of one hundred per cent of the estimates submitted by the contractor and approved by the architect or engineer.

The amounts and time of payments of any public improvements contract made by the state or any county, township, municipal corporation, school district, or other political subdivision, or any public board, commission, authority, instrumentality, or special purpose district of or in the state or a political subdivision or that is authorized by state law, except as provided in section 5525.19 of the Revised Code, shall be governed by this section and sections 153.13 and 153.14 of the Revised Code. If the time for awarding the contract is extended by mutual consent, or if the owner or its representative fails to issue a timely notice to proceed as required by this section, the owner or its representative shall issue a change order authorizing delay costs to the contractor, which does not invalidate the contract. The amount of such a change order to the owner shall be determined in accordance with the provisions of the contract for change orders or force accounts or, if no such provision is set forth in the contract, the cost to the owner shall be the contractor’s actual costs including wages, labor costs other than wages, wage taxes, materials, equipment costs and rentals, insurance, and subcontracts attributable to the delay, plus a reasonable sum for overhead. In the event of a dispute between the owner and the contractor concerning such change order, procedures shall be commenced under the applicable terms of the contract, or, if the contract contains no provision for resolving the dispute, it shall be resolved pursuant to the procedures for arbitration in Chapter 2711. of the Revised Code, except as provided in division (B) of this section. Nothing in this division shall be construed as a limitation upon the authority of the director of transportation granted in Chapter 5525. of the Revised Code.

(B) If a dispute arises between the state and a contractor concerning the terms of a public improvement contract let by the state or concerning a breach of the contract, and after administrative remedies provided for in such contract and any alternative dispute resolution procedures provided in accordance with guidelines established by the executive director of the Ohio facilities construction commission are exhausted, the contractor may bring an action to the court of claims in accordance with Chapter 2743. of the Revised Code. The state or the contractor may request the chief justice of the supreme court to appoint a referee or panel of referees in accordance with division (C)(3) of section 2743.03 of the Revised Code. As used in this division, “dispute” means a disagreement between the state and the contractor concerning a public improvement contract let by the state.

§ 153.13. Estimates of labor and materials - funds in escrow account

At the time named in the contract for payment to the person with whom it is made, the owner referred to in section 153.01 or 153.12 of the Revised Code shall approve a full, accurate, and detailed estimate of the various kinds of labor performed and material furnished under the contract, with the amount due for each kind of labor and material and the materials and amount due in the aggregate, which estimate shall be based upon actual measurement of such labor and materials, and shall give the amounts of the preceding estimate, and the amount of labor performed and materials furnished since the last estimate. From the date the contract is fifty per cent complete, as evidenced by payments in the amount of at least fifty per cent of the contract to the person with whom the owner has contracted, except in the case of contracts the total cost of which is less than fifteen thousand dollars, all funds retained pursuant to sections 153.12 and 153.14 of the Revised Code for the faithful performance of work shall be deposited in the escrow account designated in section 153.63 of the Revised Code. After the contract is fifty per cent complete, no further funds shall be retained. When the major portion of the project is substantially completed and occupied, or in use, or otherwise accepted, and there exists no other reason to withhold retainage, the retained percentages held in connection with such portion shall be released from escrow and paid to the contractor, withholding only that amount necessary to assure completion. Funds in the escrow account not heretofore paid, with accumulated interest, shall be paid to the person with whom the owner has contracted thirty days from the date of completion or either acceptance or occupancy by the owner. Such payments shall be in accordance with division (A)(2) of section 153.63 of the Revised Code. Nothing in this section shall be construed as a limitation upon the authority of the director of transportation granted in Chapter 5525. of the Revised Code.

§ 153.63. Agreement for escrow account for contractor

(A) Any money which is due from the public owner referred to in section 153.12 of the Revised Code under a contract entered into under this chapter or entered into under other applicable sections of the Revised Code for the construction, reconstruction, improvement, enlargement, alteration, repair, painting, or decoration of a public improvement shall, on the day it is due, be paid to the contractor or deposited in an escrow account, whichever is applicable, with one or more banks or building and loan associations in the state selected by mutual agreement between the contractor and the public owner. The agreement shall contain the following provisions:

(1) The money shall be deposited in a savings account or the escrow agent shall promptly invest all of the escrowed principal in obligations selected by the escrow agent, as stipulated in the agreement.

(2) The escrow agent shall hold the escrowed principal and income until receipt of notice from the public owner and the contractor, or until receipt of an arbitration order or an order of the court of claims specifying the amount of the escrowed principal to be released and the person to whom it is to be released. Upon receipt of the notice or order, the agent shall promptly pay such amount of principal and a proportionate amount of the escrowed income to the person indicated.

(3) The escrow agent shall be compensated for its services as agreed to by the public owner and the contractor from the income from the escrow account.

The agreement may include other provisions not inconsistent with this section, including, but not limited to granting authority for the escrow agent to commingle the escrowed funds with funds held pursuant to other escrow agreements and limiting the liability of the escrow agent.

(B) When the public owner, as defined in division (B) of section 2743.01 of the Revised Code, and the contractor disagree as to the conditions under which money is to be paid under this section, the parties shall apply for a decision by arbitration under the procedures of Chapter 2711. of the Revised Code. When an application is made, neither party shall initiate, and no court shall permit the maintenance of, an action in court for decision of the same issues sought to be determined in the arbitration application. The award made by the arbitrator may include the costs of arbitration. The arbitration shall be binding on all parties.

(C) When the public owner, as defined in division (A) of section 2743.01 of the Revised Code, and the contractor disagree as to the conditions under which money is to be paid under this section the contractor shall file an action in the court of claims.

(D) If the money required to be paid or deposited under division (A) of this section is not paid or deposited, the governmental entity shall pay to the contractor an amount equal to eight per cent annual interest compounded daily.

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