Retainage 101: How Florida Contractors Can Keep Cash Flow Moving

If you’ve ever been part of a construction project in Florida—whether as a general contractor, subcontractor, or even a property owner—you’ve probably come across the term retainage. At its core, retainage is meant to act as a financial safeguard. Owners hold back a portion of payments until the end of a project, ensuring the work is fully complete and defects are addressed. Sounds fair, right?

But here’s the reality: for contractors and subcontractors, retainage can create serious cash flow challenges, fuel disputes, and delay final payments for months. For owners, misuse of retainage can expose them to litigation or interest penalties. That’s why understanding Florida’s retainage laws—and how to navigate them—is critical for everyone involved in the construction process.

What Exactly Is Retainage?

Retainage (also called “retention”) is the percentage of payment withheld from contractors during the life of a construction project. The purpose is to give owners financial leverage to ensure work is completed properly and all obligations are met.

In Florida, retainage practices are governed by state statutes and contract terms. It’s especially common in public projects, but private contracts often mirror the same rules.

Think of retainage as the “final exam” for contractors. You get most of your payments throughout the project, but a piece is always held back until you’ve proven you’ve crossed every “t” and dotted every “i.”

Real-World Example: On a $1 million project, if 10% retainage is withheld, that’s $100,000 not available until the end. For subcontractors juggling payroll and materials, that can be a make-or-break amount.

Florida’s Retainage Laws and Percentage Limits

Unlike some states that leave retainage completely to contract negotiation, Florida sets statutory boundaries—especially for public projects:

Public Projects: Under Florida Statute § 255.078, retainage is capped at 10% of each progress payment until 50% of the project is complete. After that milestone, retainage must be reduced to 5%.

Local Government Contracts (Chapter 218): Similar rules apply, requiring retainage to drop to 5% after 50% completion, unless both parties agree otherwise.

Private Projects: Florida law is less prescriptive here. Retainage terms are largely dictated by contract, but excessive or abusive retainage could still be challenged. Many private contracts adopt the 10% → 5% standard for consistency.

Why This Matters: Understanding these caps ensures you know when an owner or contractor is overstepping legal boundaries. If you’re seeing retainage above 10%, or withheld past project completion without justification, it’s time to raise a flag.

How Retainage Impacts Contractors and Subcontractors

For owners, retainage feels like security. For contractors and subs, it can feel like a chokehold on cash flow. Contractors often “pass down” retainage, meaning subs also feel the squeeze—sometimes even more severely if the GC withholds a higher percentage than the owner is withholding from them.

This creates a ripple effect: subcontractors can’t pay suppliers, suppliers delay shipments, and suddenly project timelines slip.

Important Note: Under Florida law, subcontractors have the right to request information about retainage terms between the owner and general contractor. If the GC is withholding more than the owner, subs may have legal grounds to challenge that imbalance.

Releasing Retainage: How Contractors Get Paid

Retainage isn’t automatically released the day you hammer in the last nail. Florida law ties release to final completion or substantial completion, which usually means:

• Passing all final inspections and receiving certificates of occupancy.
• Completing punch list items (even the small ones like fixing trim or repainting).
• Submitting lien waivers to ensure all subcontractors and suppliers are paid.
• Delivering final warranties and closeout documents.

If retainage is withheld without justification after completion, contractors may recover interest and attorney’s fees under Florida’s Prompt Payment Act.

Pro Tip: Don’t wait until the end to gather paperwork. Keep lien releases, inspection approvals, and change orders organized throughout the job. Having everything ready makes it harder for an owner to delay release.

Common Disputes Over Retainage

Retainage is one of the top causes of construction payment disputes. The most common flashpoints include:

• Owners claiming work is incomplete or defective.
• Disagreements over whether the project has reached “final completion.”
• Retainage withheld past the statutory cap.
• Retainage used as leverage for unrelated disputes (like warranty issues or change order fights).

When this happens, contractors should look first to the contract’s dispute resolution terms—whether that means mediation, arbitration, or court. A construction attorney can also evaluate whether statutory penalties for late retainage apply.

Best Practices for Contractors and Subs

Managing retainage starts long before the final invoice. Here’s how contractors and subcontractors can protect themselves:

Negotiate Upfront: Push for reduced retainage or phased releases at project milestones. On large projects, even 2–3% lower retainage can dramatically improve cash flow.

Insist on Transparency: Subcontractors should always know what retainage terms exist between owner and GC.

Document Everything: Keep a clean paper trail of completion certificates, inspections, and punch list work. Documentation is your shield.

Act Promptly: Don’t let owners or GCs sit on retainage past statutory deadlines. Demand letters or legal action may be necessary.

Why Retainage Still Matters in Florida

With Florida’s booming construction industry—from high-rise condos in Miami to infrastructure upgrades across the state—retainage is more relevant than ever. For owners, it’s a safeguard. For contractors, it’s often a burden.

The good news? Florida’s laws are designed to create balance. Owners can protect themselves from unfinished work, while contractors have a legal framework to ensure retainage doesn’t become a weapon.

The bottom line: If you understand the rules and enforce your rights, retainage doesn’t have to cripple your project.

Is Retainage Holding Up Your Payment?

At DuFault Law, we know that delayed payments can devastate contractors and subcontractors. That’s why we fight to enforce Florida’s retainage laws, recover withheld funds, and protect your bottom line. If retainage is threatening your cash flow, let our construction law team help you get paid what you’ve earned.

• Call us at (239) 422-6400
• Email us at contact@dufaultlaw.com
• Or Visit our Contact Page to schedule a consultation