Retainage is the cash a contract lets an owner hold back. A remodel deal can name 15 percent. The states that write the rule down cap it at 5%. Oregon limits an owner to keeping 5% of the finished work’s price, and its rule covers home improvement work [1].

Minnesota sets the same 5% cap. It also forces an owner to release the cash within 60 days of the space being mostly done [2].

Where no state law caps this number, the contract sets the rules. In California, a new 5% cap skips the house. It leaves out homes of four stories or fewer [4].

The big picture:

Retainage is the slice of each payment an owner keeps until the work is done. It gives the owner power once a crew starts tearing up a house. It is also the cash that subcontractors wait on.

What strikes me is how rare a legal cap actually is. Oregon caps the hold-back at 5% of the finished work on home improvement jobs [1]. Minnesota uses the same 5% cap and lets an owner lower it on any monthly bill [2].

California put a 5% cap on private work for deals signed starting in 2026. But it carved out the normal house [4]. Virginia’s 5% rule lives in its public buying act.

It binds city halls, not a home kitchen remodel [5]. Where no cap applies, the contract is the whole rule.

By the numbers

  • 5% — Oregon’s hold-back ceiling: An owner may hold back up to 5% of the finished work’s price on home and building deals [1].
  • 60 days — Minnesota’s release deadline: The owner must pay out all kept cash within 60 days of the space being mostly done, and the cap is 5% [2].
  • 1% a month — Oregon’s late fee: Interest on the final bill starts 30 days after the builder finishes and the owner accepts the work [1].
  • $500,000 — Oregon’s escrow trigger: Above this deal price, the withheld cash must sit in an account that pays interest [1].

What I’d watch:

The moves around these numbers mean more than the percentages do. Owners and builders are re-reading their release terms. I’ve been watching how these rules play out on the ground.

  • Whose cap applies: Oregon’s rule names home improvement work directly [1]. Minnesota covers deals to design, build, fix, or keep up real estate [3]. California’s cap openly leaves out homes of four stories or fewer [4].
  • The escrow line: Oregon pushes hold-backs above $500,000 into an account that pays interest. This interest runs from the date the bill is approved [1]. Below that price, the cash just stays with the owner.
  • The reduction rule: Minnesota lets an owner shrink the hold-back on any monthly bill if work goes well. If the owner cuts it, the main builder must cut the hold-back for its subcontractors at the exact same rate [2].
  • The acceptance window: Oregon starts its interest clock at acceptance. The person getting a “done” notice has 15 days to accept the work or list what is left. If nobody answers, interest starts 30 days after that window closes [1].

The catch:

My read is that these legal caps are real but very narrow. Treating them as a national rule is a mistake. Two of the four states write the owner’s hold-back into law.

One leaves the house out, and one covers public work only. The other half of the catch is simple math. Five percent of the finished work is not 5% of the total deal.

A hold-back does not act as a warranty, either. It does not fix bad work, and it does not stop a supplier from filing a claim against the house. A tight contract names the cap, the release event, and the person who signs off.

No state law can hand over that much clarity.

At a glance

  • The Big Shift: States that write an owner’s retainage into law cap it at 5% of the finished work. California’s new cap for deals signed from January 2026 leaves the normal house out.
  • Why It Matters: The hold-back is an owner’s main power after crews arrive, and the cap decides how much cash stays put. Oregon also charges owners 1% a month if they keep funds too long.
  • What I’d Watch: How the release terms trigger payments and how rule changes travel down the builder chain.
  • The ceiling: The most an owner may keep, stated as a share of the finished work rather than the total deal.
  • The release trigger: The exact event needed before the cash is owed back, like an inspection sign-off.
  • The chain: The rule forcing a main builder to cut the hold-back for smaller crews when the owner cuts it for them.
  • The Catch: Where no cap applies, the contract is the only rule. A hold-back settles neither bad work nor separate claims from unpaid suppliers.

Related reading

Sources

[1] Oregon Revised Statutes 701.420, Partial payment; retainage; effect; interest; notice of completion — https://oregon.public.law/statutes/ors_701.420 (as amended by HB 4006, effective March 7, 2024; retrieved 2026-10-15) [2] Minnesota Statutes 337.10, Progress payments and retainages — https://www.revisor.mn.gov/statutes/cite/337.10 (retrieved 2026-10-15) [3] Minnesota Statutes 337.01, Definitions — https://www.revisor.mn.gov/statutes/cite/337.01 (retrieved 2026-10-15) [4] California Civil Code Section 8811, Retention payment, private works of improvement — https://california.public.law/codes/ca_civ_code_section_8811 (text of the section, mirrored from leginfo.legislature.ca.gov; retrieved 2026-10-15) [5] Code of Virginia Section 2.2-4333, Retainage on construction contracts — https://law.lis.virginia.gov/vacode/title2.2/chapter43/section2.2-4333/ (public contracts; retrieved 2026-10-15)