- 1 How long can a contractor hold retainage?
- 2 Why do contractors hold retainage?
- 3 Who holds Retainage?
- 4 How is Retainage calculated?
- 5 How much should a contractor hold back?
- 6 Can I withhold payment from a contractor?
- 7 Why do contractors fail?
- 8 During what period can a contractor withdraw the bid without penalty?
- 9 Is Retainage an asset?
- 10 What does substantially complete mean?
- 11 How do I get my money back from retention?
- 12 What is the difference between retention and retainage?
- 13 What is a retainage payment?
- 14 How do you record retainage payable?
- 15 How long does a subcontractor have to wait for payment?
How long can a contractor hold retainage?
Retention must be released to the contractor 30 days after the acceptance of the portion of the project on which the funds were retained. Contractors may not retain more than 5 percent from subcontractors and shall release retention to subcontractors within 30 days of the completion of the subcontract.
Why do contractors hold retainage?
The concept of retainage is unique to the construction industry and attempts to do two things: provide an incentive to the contractor or subcontractor to complete the project and protect the owner against any liens, claims or defaults, which may surface as the project nears completion.
Who holds Retainage?
A construction project’s retainage is determined by the construction contract between the parties, where the parties will agree to withhold $0 withholdings, or to some percentage (usually, 5% or 10%). Some states regulate how much can be withheld from contractors, and other states don’t.
How is Retainage calculated?
Retainage or retention can be: a fixed percentage of the contract – such as 10% of the value of the contract. a variable rate – such as 10% of the contract until the contract is 50% complete; at which time it is then reduced to 5% a variable rate – such as retainage is held at 10% on labor and 0% on materials.
How much should a contractor hold back?
The standard hold–back amount is about twice the value of the punch list items. How much retainage? Retainage is typically in the 5% to 10% range, although some contractors will negotiate for a fixed fee or limit.
Can I withhold payment from a contractor?
General contractors must pay subs within 7 days of receiving a progress payment relating to that subcontractor’s work. The timeframe can be changed by contract, and payment can be withheld for a good faith dispute (up to 150% of the amount in dispute).
Why do contractors fail?
Contractor failure usually is the result of multiple causes. Contractors may default if there are drastic financial changes due to the economy, unforeseen changes in job site conditions, or death or illness of a key employee.
During what period can a contractor withdraw the bid without penalty?
“Withdrawal of Bids: No submitted bid may be withdrawn for a period of sixty (60) days after the scheduled closing time for the receipt of bid. is the practice of a project owner withholding some payment to contractor, towards the completion of the project. The purpose of this is to ensure contractor will finish.
Is Retainage an asset?
The contractor, to whom the retainage is owed, records retainage as an asset. Retainage receivable accounts have a normal debit balance; retainage payable accounts have a normal credit balance.
What does substantially complete mean?
Substantial completion is the stage when a construction project is deemed sufficiently completed to the point where the owner can use it for its intended purpose. The contractor and owner develop and agreed on a substantial completion checklist tailored to the construction project.
How do I get my money back from retention?
If you have completed your work in a satisfactory way and corrected any defects that might have occurred, then you should be paid the money that is rightfully yours. If contractors are holding onto part of your retention, then that can represent a significant proportion of your profits.
What is the difference between retention and retainage?
In construction, the terms retention and retainage are mostly used interchangeably. However, in some cases, there is a slight difference: Retainage in construction may refer specifically to the money that is being retained, while retention refers to the act itself.
What is a retainage payment?
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.
How do you record retainage payable?
Let me show you how:
- Go to the Accounting page, then Chart of Accounts.
- Click New.
- Under the Account Type drop-down menu, select Other Current Liabilities.
- On the Detail Type drop-down menu, choose Other Current Liabilities.
- In the Name field, enter Retainage Payable.
- Click Save and Close.
How long does a subcontractor have to wait for payment?
A prime contractor or subcontractor must pay to any subcontractor, not later than within 10 days of receipt of each progress payment, unless otherwise agreed to in writing, the respective amounts allowed the contractor on account of the work performed by the subcontractors, to the extent of each subcontractor’s