Business Formation Checklist
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FAQ
Retainage serves two general 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,etc.
For example, if the complete project cost is $200,000 to be paid in five progress payments and the percentage to be retained is 5%, the calculation would be as follows: 200,000 x 0.05 = 10,000 total retainage amount. 10,000 divided by 5 = 2,000 retainage withheld from each progress payment.
INFORMATION ON HIRING GENERAL CONTRACTORS The State of Vermont does not license general contractors or home improvement contractors. To ensure the protection and safety of yourself and your property, it is important to research what is provided to include seek second opinions when searching for a contractor.
Typically, that retainage amount is taken out of each progress payment. For example, if a project calls for 10 payments of $20,000 each and a 10% retainage was negotiated, then the owner would pay $18,000 each time.
Retainage, also called retention, is an amount withheld from the contractor until a later date. It's fairly common, especially on commercial and public construction projects, and typically ranges from 5 - 10% of the total contract price.
What is Retainage? Retainage is the withholding of a portion of the funds that are due to a contractor or subcontractor until the construction project is finished. It is meant to serve as a financial incentive and an assurance that the contractor will complete the project in a satisfactory manner.
