Guides

Retainage rules in North Carolina: limits, release and worked examples

Updated November 3, 2026.

General information, not legal advice. Laws change and your contract matters. Check the linked statutes and talk to an attorney about your situation.

This page covers retainage only for North Carolina subcontractors: how much can be held, when it must come back, and what happens when a GC holds more than the owner. It works through examples with real numbers. For payment deadlines and interest on late payments too, see the full North Carolina prompt payment and retainage guide.

Every rule below links to the statute on the North Carolina General Assembly's website. The examples are our own arithmetic, applying the statute as written. Your contract can add terms, so read both.

The short version

• Public jobs (G.S. 143-134.1): no retainage at all when total project costs are under $150,000; otherwise no more than 5%; it stops at 50% complete (with the surety's consent) if performance is satisfactory; yours can't be a higher percentage than the owner holds from the GC; and it comes back within 60 days after a pay request once the owner has a certificate of substantial completion or beneficial occupancy, whichever the contract specifies.
• Private jobs (Chapter 22C): retainage held from you can't exceed the initial percentage the owner retained. Chapter 22C sets no fixed percentage and no release date, so your contract does.

Public projects: G.S. 143-134.1

The section covers public construction contracts let by the State or a political subdivision, except Department of Transportation contracts let under G.S. 136-28.1 (G.S. 143-134.1(a)).

Under $150,000: no retainage

• Law (NC public): "No retainage on periodic or final payments made by the owner or prime contractor shall be allowed on public construction contracts in which the total project costs are less than one hundred fifty thousand dollars ($150,000)" (G.S. 143-134.1(b1)). Session Law 2026-9 raised the figure from $100,000, effective June 19, 2026 (S.L. 2026-9).

Example. A county library renovation has total project costs of $120,000. Your subcontract says 10% retainage. Under (b1), neither the owner nor the GC may hold retainage on that job, so a $20,000 pay app should be paid in full: $20,000.

5% cap, and yours can't be higher than the owner's

• Law (NC public): "The owner shall not retain more than five percent (5%) of any periodic payment due a prime contractor" (G.S. 143-134.1(b1)(1)).
• Law (NC public): retainage in a subcontract "shall not exceed the percentage of retainage on payments made by the owner to the prime contractor", and any excess "shall be subject to interest to be paid by the prime contractor to the subcontractor at the rate of one percent (1%) per month or fraction thereof" (G.S. 143-134.1(b1)(3)).

Example. On a $2 million school project the owner holds 5% from the GC. Your pay app shows $40,000 of work this period.

• At 5%, retainage is $40,000 × 5% = $2,000, and the payment due is $38,000.
• If the GC held 10% ($4,000) instead, the extra 5%, or $2,000, is above the owner's percentage. The statute makes that excess subject to interest at 1% a month. It doesn't say from which day, so we don't calculate it.

The 50% stop

• Law (NC public): "When the project is fifty percent (50%) complete, the owner, with written consent of the surety, shall not retain any further retainage from periodic payments due the contractor if the contractor continues to perform satisfactorily" and nonconforming work identified in writing has been corrected. If performance becomes unsatisfactory, the owner may reinstate retainage up to 5% (G.S. 143-134.1(b1)(2)).
• Law (NC public): the project is "deemed fifty percent (50%) complete when the contractor's gross project invoices, excluding the value of materials stored off-site, equal or exceed fifty percent (50%) of the value of the contract", and on-site stored materials can't count for more than 20% of gross invoices for this test (G.S. 143-134.1(b1)(2)).
• Law (NC public): your retainage "shall be paid to the subcontractor under the same terms and conditions" as the 50% rule (G.S. 143-134.1(b1)(3)).
• Law (NC public): after 50% completion the owner may withhold additional retainage, up to the 5% cap on a payment, so that it holds 2.5% total through completion, and the GC may then withhold enough from subcontractors still on the job to offset it (G.S. 143-134.1(b3)).
• Practice: the stop isn't automatic on your paperwork. Check the retainage percentage on each pay app once the job passes 50%.

Example. A GC's contract is worth $1,000,000. Its gross project invoices total $540,000, of which $60,000 is materials stored off site. Leaving out the off-site materials gives $480,000, which is under $500,000 (50% of the contract), so the project isn't yet 50% complete for this test.

Early-finishing trades

• Law (NC public): trades that reach 100% completion by the time the project is 50% complete get full payment, less authorized deductions, if they performed satisfactorily and the architect or engineer approves the work; "the owner shall reduce the retainage for such trades to five-tenths percent (0.5%) of the contract". The listed trades are "structural steel, piling, caisson, and demolition", and the owner may name others in the original bid documents (G.S. 143-134.1(b2)).

Example. A demolition subcontract is worth $180,000, and the work is complete and approved before the project reaches 50%. Retainage is reduced to 0.5% of the contract: $180,000 × 0.5% = $900.

Release

• Law (NC public): "Within 60 days after the submission of a pay request and one of the following occurs, as specified in the contract documents, the owner with written consent of the surety shall release to the contractor all retainage on payments held by the owner": the owner receives a certificate of substantial completion, or the owner receives beneficial occupancy or use (G.S. 143-134.1(b1)(4)).
• Law (NC public): the owner may keep enough to secure completion or corrections, but no more than "two and one-half times the estimated value of the work to be completed or corrected" (G.S. 143-134.1(b1)(4)).
• Law (NC public): "third-party claims against the contractor or any additive change orders" are not a basis for delaying the release (G.S. 143-134.1(b1)(5)).
• Law (NC public): federal contract or grant requirements can override these retainage rules, and each bid document must say when they do (G.S. 143-134.1(b6)).

Example. The owner holds $50,000 of retainage when it receives the certificate of substantial completion. Punch list work is estimated at $4,000. The most it may keep back is $4,000 × 2.5 = $10,000, so at least $40,000 falls under the 60-day release rule.

Private projects: Chapter 22C

• Law (NC private): the contractor may withhold "a reasonable amount for retainage not to exceed the initial percentage retained by the owner" (G.S. 22C-4).
• Law (NC private): Chapter 22C doesn't apply to residential contractors or to residential projects of 12 or fewer units (G.S. 22C-6).
• Chapter 22C sets no fixed percentage and no release deadline for retainage. Those come from your contract.

Example. On an office building the owner holds 5% from the GC. Your subcontract says 10%. Your pay app shows $30,000 of work this period. Retainage held from you shouldn't exceed 5%: $1,500, not $3,000. Ask the GC what the owner holds before the first pay app.

What to do with this

• Ask whether the job is public or private, the total project cost, and what percentage the owner holds from the GC.
• Track retainage on every pay app. The retainage calculator and tracker keeps a running total you can download as a CSV.
• South Carolina job? See retainage rules in South Carolina.

Related tools and guides

• Late payment interest calculator (NC and SC): the 1%-a-month interest the prompt-payment statutes allow, worked out from your dates.
• Retainage calculator and tracker: retainage held and amount due on one pay app, and a running total across a job.
• How to bill a general contractor: the monthly pay-app cycle from schedule of values to final payment.

Sources

• N.C. Gen. Stat. § 143-134.1 (ncleg.gov)
• N.C. Session Law 2026-9 (ncleg.gov)
• N.C. Gen. Stat. Chapter 22C (ncleg.gov)