Texas law obligates construction owners to withhold 10% of the value of the work during the course of a project and for 30 days after final completion. This is generally known as statutory retainage.

2022 CHANGES Under §53.052(d), a lien for retainage must be filed no later than the 15th day of the 3rd month after the month the original contract was completed, terminated, or abandoned.

What is an Invalid Lien? An invalid lien is a lien that was not properly filed against a project. The contractor who filed the lien is probably still owed money, but the lien affidavit was not properly perfected because the correct steps were not taken.

All of this language is a bit dense, but essentially, anyone who has an agreement to improve property with you directly, or an agreement with another contractor who has such an agreement with you, can file a lien if left unpaid. This commonly includes contractors, subcontractors, and material suppliers.

The client, who owes retainage to the contractor, records retainage as a liability. For example, if a contractor works on a $100,000 project with a ten percent retainage, then they will record $90,000 as accounts receivable and $10,000 as retainage due.

Steps to add retainage to the Chart of Accounts: Set Category Type to Other Current Assets. Set Detail Type to Retainage. Enter a Name for the account (e.g. Retainage Receivable) Click Save.

The only way to avoid the retainage requirement is to obtain a payment bond in conformance with Texas Property Code § 53.202.

Retainage is a percentage of the contract amount that is held until a specific date after the completion of the work. You release retainage by creating a voucher pay item with a Pay Status of A (Available to Pay) for the amount that you want to release. The retainage amount is also referred to as holdback.