How much retainage may a covered Michigan public agency withhold?

Under MCL 125.1563, a covered public agency may generally retain no more than 10% of work in place until the work is 50% complete. After 50%, it generally may not withhold additional retainage unless it determines progress is unsatisfactory or identifies another specific cause related to contractor performance.

Does Michigan have the same statutory cap for private construction?

The public-works limits in 1980 PA 524 apply only to construction contracts with covered public agencies. This page did not identify a comparable generally applicable Michigan statutory percentage cap for ordinary private construction; the contract and other applicable law require review.

Is this Michigan retainage guide legal advice?

No. It is editorial research based on public sources, has not been reviewed by a lawyer, and cannot determine which rule or deadline applies to a particular project.

MichiganPublic informationNot legal advice

Michigan Retainage Laws for Construction

Q: Does the Michigan public-agency rule cover every public project?

No. MCL 125.1561 excludes several entities, including the state transportation department, school districts, junior or community colleges, the Michigan State Housing Development Authority, and municipal electric utilities or agencies. Other project-specific statutes or contract terms may apply.

Michigan has a detailed retainage statute for construction contracts with certain public agencies. It does not cover every governmental entity, and it should not be applied automatically to private, transportation, school, housing-authority, utility, or federal work.

Research status: Last researched September 1, 2026 from the official public sources linked below. Prepared by the PayAppPro editorial team. This page has not been reviewed or approved by a lawyer. Review schedule: quarterly and after relevant Michigan legislative changes.

Important legal-information disclaimer

This is a plain-language summary of publicly available statutes, not legal advice, a legal opinion, or a substitute for advice from Michigan construction counsel. PayAppPro is a billing-software provider, not a law firm. We have not investigated your owner, contract, funding, agency status, payment chain, progress determination, acceptance, notices, claims, or disputes.

Do not use this page to calculate a legal deadline or decide whether to withhold, release, demand, or pursue retained funds. Verify the current official text and obtain project-specific advice from qualified counsel.

Michigan retainage at a glance

Project category	Public-information summary	Start with
Covered Michigan public agency	Up to 10% of work in place until the work is 50% complete. After 50%, no additional retainage unless the agency determines progress is unsatisfactory or identifies another specific performance-related cause.	MCL 125.1561–125.1564
Excluded or specially governed public entity	Do not assume the Act 524 rule applies. The statutory definition expressly excludes several entities.	Entity-specific law and contract
Private construction	The cited public-works Act does not govern ordinary private contracts. This research did not identify a generally applicable Michigan private-project percentage cap.	Contract; Construction Lien Act; counsel
Direct federal contract	Federal contract clauses govern; FAR 52.232-5 permits up to 10% when satisfactory progress has not been made.	Contract and FAR 52.232-5

This table is a classification aid, not a conclusion about a particular project.

Covered public construction: the 50% turning point

1980 PA 524 governs construction contracts with “certain public agencies.” Under MCL 125.1563, a covered agency may retain no more than 10% of the dollar value of work in place until work is 50% in place. After that point, additional retainage generally may not be withheld unless the agency determines the contractor is not making satisfactory progress or identifies another specific cause relating to performance; even then, the additional retainage is limited to 10% of the work beyond 50%.

Handling and release of retained funds

Retained funds generally may not exceed the agency’s pro-rata matching requirement.
They generally must be separately accounted for and deposited in an interest-bearing Michigan financial institution, subject to the statute’s grant-funding exception.
Retainage and earned interest generally are released with the final progress payment, subject to MCL 125.1564.
After 94% of the work is in place, the original contractor may request release by providing a mutually acceptable irrevocable letter of credit in the amount of retainage plus interest.

MCL 125.1564 contains the dispute-resolution and final-payment mechanics. Those provisions should be read in full before calculating when a final payment is due.

The definition excludes important public owners

MCL 125.1561 defines “public agency” broadly but expressly excludes the Michigan Department of Transportation, school districts, junior or community colleges, the Michigan State Housing Development Authority, and municipal electric utilities or agencies. Drain work and other specialized projects may also have separate statutes.

Practical consequence: “Public project in Michigan” is not enough. Confirm the exact contracting entity and enabling law before applying the 10%/50% framework.

Private construction

Act 524 is not a general private-project retainage statute. Michigan’s Construction Lien Act addresses payment documentation, lien rights, sworn statements, waivers, and priorities. MCL 570.1119 recognizes that contract retainage may not be payable until an additional contractual event occurs, but that is not the same as a universal statutory percentage cap or release date.

For a private project, review the retainage clause, payment conditions, completion definitions, dispute provisions, sworn-statement and waiver requirements, and lien law separately. Do not import the public 10% rule.

Federal and federally assisted projects

For a direct federal fixed-price construction contract, FAR 52.232-5(e) calls for full payment when satisfactory progress is achieved and permits the contracting officer to retain up to 10% when it is not. FAR 32.103 says retainage should be determined case by case and should not substitute for good contract management. Federally assisted state or local work requires review of grant terms and incorporated clauses.

What billing teams should verify

Exact owner and whether MCL 125.1561 includes or excludes it
Private, covered public, specially governed public, direct federal, or federally assisted status
Percentage of work legally and contractually in place
Any written determination of unsatisfactory progress or specific performance cause
Separate-account and interest treatment
Acceptance, dispute, final-payment, and letter-of-credit provisions
Prime and lower-tier contract terms

PayAppPro can calculate and display retainage using project inputs. It cannot classify the owner, decide whether progress is satisfactory, interpret an exception, or determine when funds are legally due.

Official sources

Source review date: September 1, 2026. Links point to official government publications. A linked provision may not apply to your facts.

Frequently asked questions

Is Michigan public retainage always 10%?

No. The statute states a maximum for covered agencies and changes the withholding rule after 50% of work is in place. Some public entities are excluded.

Does Michigan cap private retainage at 10%?

Not under Act 524. Ordinary private-project retainage requires contract-specific and other legal analysis.

Has a Michigan lawyer reviewed this page?

No. It is editorial research based on linked public sources and is not legal advice.

Related retainage resources

Retainage Laws by State · California · Texas · Florida · Michigan · New York · Retainage billing calculations