Private works of improvement: retention payments.
- Limits retention payments on private construction projects to 5% of contract value starting January 1, 2026.
- Exempts residential projects under four stories and cases where contractors fail to provide required performance bonds.
- Requires courts to award attorney fees to prevailing parties in retention payment disputes.
- Applies retention payment limits equally to contractors and all levels of subcontractors.
State Senator Dave Cortese's legislation to regulate retention payments in private construction contracts establishes a 5% cap on payments withheld from contractors and subcontractors, marking a shift in how construction project finances are managed in California.
The measure, which takes effect January 1, 2026, prohibits owners, direct contractors, and subcontractors from withholding more than 5% of any payment or of the total contract price on private works of improvement. The retention percentage in subcontractor agreements must match the rate specified in the primary contract between the owner and direct contractor. The law includes provisions for court-awarded attorney's fees to prevailing parties in enforcement actions.
Two key exceptions apply to the retention cap: when subcontractors fail to furnish required performance and payment bonds after receiving advance notice, and for residential projects that are not mixed-use and do not exceed four stories. These carve-outs maintain flexibility for specific project types while standardizing retention practices across most private construction contracts.
 Dave CorteseD Senator | Bill Author |  Not Contacted |
Email the authors or create an email template to send to all relevant legislators.
Introduced By
Latest Voting History
| Ayes | Noes | NVR | Total | Result |
|---|---|---|---|---|
| 71 | 0 | 8 | 79 | PASS |
- Limits retention payments on private construction projects to 5% of contract value starting January 1, 2026.
- Exempts residential projects under four stories and cases where contractors fail to provide required performance bonds.
- Requires courts to award attorney fees to prevailing parties in retention payment disputes.
- Applies retention payment limits equally to contractors and all levels of subcontractors.
Email the authors or create an email template to send to all relevant legislators.
Introduced By
State Senator Dave Cortese's legislation to regulate retention payments in private construction contracts establishes a 5% cap on payments withheld from contractors and subcontractors, marking a shift in how construction project finances are managed in California.
The measure, which takes effect January 1, 2026, prohibits owners, direct contractors, and subcontractors from withholding more than 5% of any payment or of the total contract price on private works of improvement. The retention percentage in subcontractor agreements must match the rate specified in the primary contract between the owner and direct contractor. The law includes provisions for court-awarded attorney's fees to prevailing parties in enforcement actions.
Two key exceptions apply to the retention cap: when subcontractors fail to furnish required performance and payment bonds after receiving advance notice, and for residential projects that are not mixed-use and do not exceed four stories. These carve-outs maintain flexibility for specific project types while standardizing retention practices across most private construction contracts.
Latest Voting History
| Ayes | Noes | NVR | Total | Result |
|---|---|---|---|---|
| 71 | 0 | 8 | 79 | PASS |
Dave CorteseD Senator | Bill Author | Not Contacted |