Texas Retainage Requirements
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10% Retainage Limit
For work in which a mechanic’s lien may be claimed, the property owner must retain 10%.
30 Day Pay Period
The time period to withhold retainage is very complicated and not well defined in Texas law. It appears that 30 days after work is completed retainage must be released.
There is a Process to Recover
Yes, specific notices and timing requirements apply to the recovery of retainage in Texas.
Not Held In Escrow
In Texas, contractors and owners do not need to hold retainage funds in a separate escrow account.
5% or 10% Retainage Limit
On projects valued at $5M or less, no more than 10% may be withheld as retainage. On projects valued at more than $5M, no more than 5% of retainage may be withheld.
Pay Period
The statute is unclear, but retainage may not be withheld after the project reaches substantial completion.
There is a Process to Recover
Yes, specific notices and timing requirements apply to the recovery of retainage in texas.
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 Texas’ retainage requirements.
Texas’ retainage limits and deadlines
For private projects, the property owner must retain 10% of the total contract price or 10% of the reasonable value of the labor and/or materials if there is no contract price.
In order to make a claim for a lien on retainage, the claimant must send a Notice of Contractual Retainage no later than 30 days after the claimant’s contract is completed, terminated, or abandoned, or 30 days after the original contract is terminated or abandoned; whichever is earlier.
The deadline to file a claim on retainage can be tricky. Generally, the lien must be filed no later than 30 days after project completion, or after the original contract is terminated or abandoned; whichever is earlier. However, a claimant other than an original contractor claiming a lien for retainage must also file an affidavit with the county clerk no later than the 15th day of the 3rd month after the month in which the original contract under which the claimant performed was completed, terminated, or abandoned.
For public projects, the amount of retainage that may be withheld depends on the overall project value. For contracts valued at $5M or less, no more than 10% may be withheld as retainage. On projects valued at more than $5M, the amount of allowable retainage is only 5% of the total contract price.
To make a claim for retainage on public projects, the claimant must send a Written Notice of Claim on Retainage Due no later than 90 days after the completion of the project. As for the deadline to enforce the claim, claimants should follow the payment bond enforcement deadline, which is no earlier than 61 days after the claimant’s last furnishing of labor and materials, and no later than one year after the date the claimant last performed labor or last delivered materials to the project.