Pennsylvania Retainage Requirements
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Not Regulated by State Law
Retainage must be released by the owner within 30 days of final acceptance of the work.
Within 14 days receipt of payment by the contractor, the contractor must pay all subcontractors due.
There's No Process to Recover
Not Held In Escrow
In Pennsylvania, contractors and owners do not need to hold retainage funds in a separate escrow account.
"Retainage generally cannot exceed 10%. Once more than 50% of the work is complete, retainage cannot exceed 5%.
For Dept. of Gen. Services contracts, retainage cannot exceed 6%. Once more than 50% of the work is complete, retainage cannot exceed 3%.
For highway contracts, retainage cannot exceed 5%. At 50% completion of the project, no additional retainage is allowed."
At 50% completion, if work is satisfactory, half of the withheld funds must be released to the contractor. Upon receipt of request for final payment inspection must commence within 30 days, and retainage released within 45 days of approval.
Within 20 days receipt of payment by the contractor, the contractor must pay all subcontractors due.
There's No 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 frequently asked questions about Pennsylvania’s retainage requirements. The Pennsylvania retainage statutes are reproduced below on this page.
Pennsylvania retainage limits and deadlines
There is no specific limit on the amount of retainage that can be withheld on a private construction project. Furthermore, there is no prohibition on a contractor withholding retainage even if the property owner is not. However, upon final acceptance of the project, the owner (or contractor as applicable) must release retainage within 30 days. Once received, retainage must be released to subs and suppliers within 14 days of receipt.
On public works projects in Pennsylvania, the amount of retainage that can be withheld is generally capped at no more than 10% of each progress payment. When the project reaches 50% completion of the prime contract, if satisfactory progress is being made, the entity must release half of the retainage withheld, and no more than 5% of each remaining progress payment may be withheld.
Upon receipt of a request for final payment from the prime contractor, the public entity must commence final inspection within 30 days, and retainage must be released within 45 days of approval. When a contractor receives retainage payments they must, in turn, release retained to their subs and suppliers within 20 days.