New York Retainage Laws for Construction
New York generally uses a 5% retainage ceiling across several covered private and public categories, but the governing statute, scope, release rule, and exceptions differ. The project value, residential status, public owner, bonds, contract terms, approval, and payment chain all matter.
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 New York 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 New York construction counsel. PayAppPro is a billing-software provider, not a law firm. We have not investigated your contract, project value, owner, residential status, bonds, approval, payment chain, 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 current official law and obtain project-specific advice from qualified counsel.
New York retainage at a glance
| Project category | Public-information summary | Start with |
|---|---|---|
| Covered private construction | Generally no more than 5% by mutual agreement; owner release generally no later than 30 days after final approval. | GBL §§ 756, 756-c |
| Excluded private project | Article 35-E excludes projects below $150,000 and specified residential projects; do not assume its cap or timing applies. | GBL § 756 and contract |
| Covered state public work | Generally no more than 5% of each progress payment; higher withholding is possible under stated no-bond provisions. | State Finance Law § 139-f |
| Covered local public work | Generally no more than 5%; up to 10% may apply under the specified no-bond condition. | General Municipal Law § 106-b |
| Direct federal contract | Federal clauses govern; FAR 52.232-5 permits up to 10% if satisfactory progress has not been made. | Contract and FAR 52.232-5 |
Similar headline percentages do not make these statutes interchangeable.
Covered private construction
General Business Law § 756-c provides that, by mutual agreement, an owner may retain no more than 5% of the contract sum. A contractor or subcontractor also may retain no more than 5%, and generally no more than the actual percentage retained by the owner. Owner release is due no later than 30 days after final approval of the work. Failure to release as required can trigger interest at 1% per month.
Scope is essential
GBL § 756 defines covered “construction contract” using an aggregate project cost of at least $150,000. It excludes public works and specified residential work, including individual one-, two-, or three-family dwellings; qualifying tracts of 100 or fewer one- or two-family dwellings; projects of 4,500 square feet or less; and certain smaller federally, state-, or municipally assisted residential projects described in the statute.
GBL § 756-a separately addresses invoice review and payment, including written grounds for disapproval. GBL § 757 makes specified contrary provisions void, including a covered retainage requirement above 5%.
State public works
State Finance Law § 139-f generally limits a covered state public owner to 5% of each progress payment. It permits more than 5% but no more than 10% when the public owner does not require both full performance and labor-and-material bonds. The statute contains additional small-contract provisions under which bonds may be dispensed with and 20% may be retained until completion and acceptance.
At substantial completion, the contractor requisitions the remaining balance; the owner generally may retain twice the value of remaining work plus amounts needed for qualifying project claims, liens, or judgments. The statute also generally requires contractors to pay lower tiers within seven calendar days after receipt and limits downstream retainage, subject to its bond-related rule.
Local public works
General Municipal Law § 106-b generally limits a covered local public owner to 5% of each progress payment. If the public owner does not require full performance and labor-and-material bonds, it may retain more than 5% but no more than 10%. The statute provides separate remaining-balance, written-list, prompt-payment, interest, and seven-day downstream-payment mechanics.
New York City and particular authorities or public entities may be treated differently within the statute or under other laws. Confirm the owner rather than relying on the label “municipal project.”
Federal and federally assisted projects
For direct federal fixed-price construction, FAR 52.232-5(e) calls for full payment when satisfactory progress is achieved and permits up to 10% when it is not. FAR 32.103 requires case-specific treatment. Both New York public-work statutes contain federal-preemption provisions; federally assisted projects also require review of grant and prime-contract terms.
What billing teams should verify
- Private, state public, local public, direct federal, or federally assisted status
- Aggregate project value and Article 35-E residential exclusions
- Exact public owner, including New York City or authority status
- Performance and payment bond requirements
- Owner and lower-tier retainage percentages
- Invoice approval, substantial completion, final approval, and receipt dates
- Written disapproval, remaining-work lists, claims, liens, and judgments
PayAppPro can calculate and track the percentage entered for billing. It cannot determine statutory coverage, whether an exception applies, whether approval occurred, or when legal release is required.
Official sources
- GBL § 756 — private-contract definitions and exclusions
- GBL § 756-a — invoice and payment obligations
- GBL § 756-c — private retainage
- GBL § 757 — void provisions
- State Finance Law § 139-f — state public works
- General Municipal Law § 106-b — local public works
- FAR 52.232-5
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 all New York retainage capped at 5%?
No. Several covered categories generally use 5%, but their scope and exceptions differ. Public no-bond situations can permit higher withholding.
Does the private 5% cap cover every residential project?
No. Article 35-E expressly excludes specified residential projects and projects below its threshold.
Has a New York 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