Georgia retainage law: a plain-English guide for contractors

What is retainage in construction?

Retainage (also called retention) is the part of each progress payment the owner holds back until the work is finished. The general contractor usually passes the same percentage down to its subcontractors, so everyone in the chain has money held back.

"5% retainage" means that on a $200,000 pay application, $10,000 is withheld and $190,000 is paid. Over a long job the held amount adds up: on a $4 million subcontract at 5%, $200,000 is sitting with someone else by the end of the work. On your books it's a retainage receivable. On the GC's or owner's books it's retainage payable.

Retainage exists to give the owner leverage to get the work finished and to protect against unpaid subcontractors and suppliers filing liens. It also means contractors finance part of the project with their own earned money, often for a year or more.

Private projects: the contract sets the rate

Georgia's Prompt Pay Act (O.C.G.A. § 13-11-1 and following) governs payment on most construction work. It does not set a fixed retainage percentage for private jobs. Under § 13-11-5, the owner may withhold "a reasonable amount for retainage," but no more than the percentage written into the owner-contractor contract. So the number you agree to is the number that controls.

• Subs can't be held at a higher rate. A GC or sub may withhold retainage from its own subcontractor, but not more than the percentage the owner is holding from the GC on that sub's work (§ 13-11-5(b)).
• Reductions flow down. When the owner reduces the GC's retainage, the GC must reduce each sub's retainage the same way, once the sub's work in place reaches 50 percent of its subcontract value, the work is going satisfactorily, and the sub has given any reasonable assurances (such as a payment and performance bond) the GC requires (§ 13-11-6).
• Other reasons to withhold. Separately from retainage, an owner or GC can withhold for unsatisfactory progress, unremedied defects, disputed work, third-party claims, unpaid labor or material bills, damage, or reasonable evidence the job can't be finished for the unpaid balance (§ 13-11-5).

Who the Act covers. "Owner" includes private parties and state and local government entities, except counties under 10,000 people and cities under 2,500 (§ 13-11-2). The Act doesn't apply to residential projects of 12 or fewer units (§ 13-11-10) or to contracts signed before January 1, 1995 (§ 13-11-11).

How long can retainage be held in Georgia?

Who pays whom: Deadline

Public owner to contractor (retainage): Within 30 days after substantial completion, once the invoice and required documents are in. The owner may keep 200% of the value of any incomplete items (§ 13-10-80).

Private owner to contractor (retainage): No separate statutory release date. Timing comes from the contract.

Owner to contractor (progress payments): Within 15 days after the owner or its representative receives the pay request (§ 13-11-4)

Contractor to subcontractor: Within 10 days after the contractor receives payment or retainage covering the sub's work (§§ 13-11-4, 13-11-6, 13-10-80)

Subcontractor to lower-tier sub: Within 10 days after the sub receives payment or retainage

On private work, retainage release is a contract question. Read your contract's definition of substantial or final completion and the documents it requires. Whether a late private retainage payment triggers the Act's interest is a fact question. Check with counsel.

Interest and late payment in Georgia

Under § 13-11-7, a periodic or final payment that is late (more than 15 days to a contractor, or more than 10 days after receipt to a subcontractor) carries interest at 1 percent per month on the unpaid balance, starting the day after it was due. There are three catches:

• You have to give notice. No interest is due unless the party being charged was notified of § 13-11-7 when the payment request was made. Put the notice on every pay application.
• Accepting payment waives it. Accepting a progress or final payment releases interest claims on that payment.
• The contract can change it. Parties can agree to different interest rates and payment periods, and the contract then controls. But for a willful breach of the contract's payment timing, the statutory rate applies.

In a suit or arbitration to enforce a claim under the Act, the prevailing party recovers reasonable attorney's fees (§ 13-11-8). That cuts both ways, so weigh it before filing.

The money involved is real. On a $10 million public job at the 5 percent cap, $500,000 of retainage can be held at the end. Held for 18 months, that $500,000 earns about $28,500 at 3.7% compounded monthly. Outside the narrow water and sewer rules below, Georgia law doesn't say who gets that interest, so it usually stays with whoever holds the money.

Retainage that earns interest on Georgia projects

With Retain-Edge, Georgia retainage sits in a segregated, interest-bearing account at an FDIC-insured partner bank, with a balance for every contractor and the interest paid to the GCs and subcontractors who earned it. Retain-Edge administers the account. It never holds, lends or invests the funds, and is now enrolling pilot projects.

Get early accessCalculate your interest

Public projects in Georgia: the 5% cap

Since July 1, 2022, O.C.G.A. § 13-10-80 caps retainage on public works contracts at 5 percent of each progress payment for the life of the job. It covers contracts with the state, counties, cities, authorities, school boards and other public bodies, signed on or after July 1, 2022. Before that date the rule allowed up to 10 percent until the job was half done, so check with counsel on older contracts.

• Monthly progress payments. The contract must provide for progress payments at least monthly, including properly stored, insured and protected materials and equipment.
• Release at substantial completion. When the work is substantially complete (or meets another completion standard in the contract) and is reasonably satisfactory, the owner must pay the retainage within 30 days after the invoice and required documents are provided. The owner may hold 200 percent of the value of each incomplete item until it's done.
• Ten-day flow-down. The GC must pass retainage through to subs within 10 days of receiving it and reduce each sub's retainage by the same percentage. Subs owe the same to lower tiers.
• A floor, not a ceiling. Contract terms that give contractors less are unenforceable. Terms that give them more are allowed.
• Exceptions. The section doesn't apply to Georgia DOT road and highway contracts, or to contracts worth $150,000 or less or lasting 45 days or less at award.

Water and sewer contracts. A separate rule, § 13-10-81, lets public owners retain up to 5 percent of the gross value of completed work on water and sewer contracts. That retainage must be invested at the current market rate, and the interest goes to the contractor if the engineer certifies the job was finished on time and on price. Under § 13-10-82, the owner may instead use an escrow account at a Georgia-chartered state or national bank, with the interest paid to the contractor and the escrow agent's fees paid by the contractor. How these water and sewer rules interact with § 13-10-80 on a given contract isn't spelled out. Check with counsel.

The Prompt Pay Act's payment deadlines and 1 percent monthly interest can also reach public owners, except small counties and cities.

How to get retainage released faster

1. Negotiate the rate before you sign. On private work the contract percentage is the cap. Point to the 5 percent public cap as a reasonable benchmark.
2. Put the § 13-11-7 notice on every pay app. Without it, no statutory interest is due on late payments.
3. Pin down substantial completion. Know exactly which invoice and documents your contract requires, and submit them the day the work qualifies so the 30-day public clock starts.
4. Build the closeout package as you go. Collect warranties, O&M manuals, as-builts and certifications with your monthly pay apps instead of chasing them at the end.
5. Track the 10-day flow-down. Subs: ask the GC when the owner released retainage. The 10-day clock runs from the GC's receipt.
6. Ask for scope-level release. If your scope is finished, ask for your retainage to be released when your scope clears, not when the last trade finishes. Many contracts allow it.

Georgia retainage FAQ

What is the maximum retainage in Georgia?+

On public works contracts signed on or after July 1, 2022, 5 percent of each progress payment (O.C.G.A. § 13-10-80). On private jobs there's no fixed statutory cap. Retainage can't exceed the percentage in the owner-contractor contract, and a sub can't be held at more than the owner holds on that sub's work (§ 13-11-5).

When must retainage be released on a Georgia public project?+

Within 30 days after substantial completion, once the invoice and required documents are provided. The owner may keep 200 percent of the value of any incomplete items until they're done.

How fast must a GC pay retainage to subs in Georgia?+

Within 10 days after the GC receives retainage from the owner. The same 10-day rule applies from subs to lower-tier subs (§§ 13-11-6 and 13-10-80).

What interest applies to late payments in Georgia?+

1 percent per month on the unpaid balance under the Prompt Pay Act (§ 13-11-7), but only if the payer was notified of that section when the payment was requested. The contract can set a different rate, except in a willful breach of the payment terms.

Can I recover attorney's fees?+

Yes. In an action to enforce a claim under the Prompt Pay Act, the prevailing party recovers reasonable attorney's fees, including at trial, on appeal and in arbitration (§ 13-11-8). If you lose, you may pay the other side's fees.

Who gets the interest earned on retainage in Georgia?+

Only public water and sewer contracts require it. There, retainage is invested and the interest is paid to the contractor if the job finishes on time and on price (§ 13-10-81). On other jobs, Georgia law is silent, so the holder usually keeps it unless the contract says otherwise.

Does the Prompt Pay Act cover homebuilding?+

Not for residential projects of 12 or fewer units (§ 13-11-10). Larger residential projects and commercial work are covered.

Retainage guides for other states

California5% cap · 2%/mo late penaltyConnecticut5% cap · mandatory escrowFlorida5% public cap · 2%/mo lateKentucky10%/5% caps · escrow at $2M+LouisianaEscrow at $50K+ · 10%/5% publicNew York5% cap · void above itNorth Carolina5% public cap · 50% stopOregon5% cap · retainage bondsTennessee5% cap · escrow at $500K+Texas10% reserve · public caps