Remodel holdback and retainage: what to put in the contract

People use "holdback" and "retainage" for money that stays unpaid until something specific happens: a punch list, a final inspection, or a lien waiver. That is not the deposit, and it is not the same as refusing to pay in a fight. On a house, the rule is whatever your contract and your state say. There is no national percentage to copy onto the bid.

Three different piles of money

• The deposit is money you pay before the work, or at the start. The FTC says not to pay the full price up front, and that some states limit the down payment (FTC). California is one example in the deposit and payment schedule guide.
• A progress payment is money tied to work along the way. In California, a home improvement contract that takes payments before the end has to schedule them in dollars and cents, tied to the work and materials, and the statute's required statement says it is against the law for a contractor to collect for work not yet completed or materials not yet delivered, while still allowing a down payment (Cal. Bus. & Prof. Code § 7159).
• A holdback or retainage is an amount the contract, or a statute, says not to pay until a later event. Public and commercial jobs often have a statute for this. A kitchen contract may not. Read the payment section instead of assuming a percent.

Texas: a required reserve, not a punch-list trick

Texas Property Code § 53.101 says that during the progress of work under an original contract for which a mechanic's lien may be claimed, and for 30 days after that work is completed, the owner shall reserve 10 percent of the contract price of the work to the owner, or 10 percent of the value of the work measured the way that section describes (Tex. Prop. Code ch. 53). The chapter uses "retainage" for an amount that is not required to be paid to the claimant within the month after the labor or material.

That is a lien statute. It is not permission to keep 10 percent until you feel finished, and it is not the rule in every state. The same chapter has separate notice and timing rules for claimants. If the house is in Texas, read the section or ask a Texas lawyer before you treat the last invoice as optional. The closeout steps that sit next to it are in final payment and the punch list, including the Texas bills-paid affidavit that guide already covers.

If you want a finish holdback in the contract

Agree to it before the job, in the payment schedule, not on the day of the last invoice. Write:

• ☐ The amount, in dollars, or the percent and what it is a percent of.
• ☐ The event that releases it. Name the punch-list items, the final inspection if a permit was required, or both.
• ☐ The lien waiver that has to match that payment. See lien waivers.
• ☐ That a change to the scope changes this line only through a signed change order. See change orders.

A sentence that says "10 percent at the end" with no release condition is how the last week turns into an argument. The payment schedule checker lines the payments up against the work and flags a final payment that is not tied to completion.

Holding money because something is wrong

That is a different decision. Holding back for unfinished or defective items can be reasonable, and it can also put you in breach, depending on the contract and the state. The FTC's line is to never make the final payment until the work is done and you are satisfied. If you hold anything, write what is held, why, and what releases it. The longer version is in contractor did poor work and what to do in a contractor dispute.

Keep the schedule with the project

RenoBinder keeps the payment lines next to the scope and the change orders, so the holdback is not a number you remember later. One room is free.

This is general information, not legal advice. Rules vary by state; for a dispute, talk to a licensed attorney or your state contractor board.

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