Retention on private projects is now capped at 5%
For most private construction contracts made on or after January 1, 2026, retention may not exceed 5% of any payment or of the contract price, with exceptions for residential projects of four stories or fewer and for subcontractors who don't provide a bond required in writing before bid.
Reviewed by Laurence S. Bezinover · Published
What changed
SB 61 added Civil Code § 8811. Owners, direct contractors, and subcontractors may withhold no more than 5% of any payment as retention, and no more than 5% of the contract price in total. A subcontract cannot withhold a higher percentage than the prime contract. The prevailing party in an action to enforce the rule recovers attorney's fees.
Who it affects
Private owners, developers, general contractors, and subcontractors. The cap does not apply to public works, to residential projects of four stories or fewer that are not mixed-use, or where a subcontractor fails to provide a performance and payment bond required in writing before or at bid.
Questions to raise with counsel
- Do our contract forms for private projects entered into on or after January 1, 2026 cap retention at 5%?
- Could bonds or other security replace retention above 5%?
- If we rely on the bond exception, is the bond requirement stated in writing before bids?
This briefing is general information about California law, not legal advice for your situation. Reading it does not create an attorney-client relationship.