Business FinancesQuestion 663 of 690
On a private construction project, the owner is generally entitled to withhold from each progress payment a 'retention' (retainage) of up to:
a.10% by statute, with no contract flexibility
b.An amount as agreed in the contract, but customarily 5%–10% on private work; for public works on most state contracts, retention is capped at 5% under Public Contract Code §7201
c.20% during the first half of the project and 0% thereafter
d.Whatever the lender requires, with no statutory ceiling on public projects
Explanation
On private works, retention amounts are a matter of contract — typically 5%–10% — while Public Contract Code §7201 caps retention on most state public works contracts at 5% (with limited exceptions for project-specific findings). Civil Code §8812 and §8814 govern timing of retention release on private projects (generally within 45 days of completion). The other options misstate the legal framework. Retention serves as performance security and a source for back charges, but excessive withholding triggers prompt-payment penalties (2% per month) and attorneys' fees under §8818.
Law Reference: Civil Code §8810Practice all 690 questions free — no signup required.
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