A percentage held back from each contractor payment as a performance guarantee until the project is fully complete.
Retention (also called retainage) is a percentage of each progress payment — typically 5% or 10% — withheld by the owner until the project achieves substantial or final completion to ensure the contractor completes all work and corrects deficiencies. The retained amount creates a performance incentive and a buffer against cost overruns. Many states have prompt payment laws limiting retention amounts and requiring timely release upon project completion.
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