California retention payment rules

Retention — the slice of every payment held back until the end of a job — is where a lot of subcontractor money gets stuck. California sets firm deadlines for releasing it and penalizes late payment. Here’s how the rules work on private projects.

The 45-day rule: owner to direct contractor

On private works, the owner must release retention to the direct contractor within 45 days after completion of the work of improvement (Cal. Civ. Code § 8812). This is the first domino — the money has to leave the owner before it can reach you.

The 10-day rule: GC to subcontractor

Once the direct contractor receives retention from the owner, it must pay each subcontractor its share within 10 days(Cal. Civ. Code § 8814). A GC can’t sit on your retention after it’s been paid for your portion of the work.

The penalty: 2% per month plus attorney’s fees

If retention is wrongfully withheld, the withholding party owes a penalty of 2% per monthon the improperly withheld amount, and the prevailing party recovers attorney’s fees and costs (Cal. Civ. Code § 8818). Like the broader prompt payment penalties, this fee-shifting makes retention claims worth pursuing.

The good-faith dispute exception

A party may withhold retention in good faith, but only up to 150% of the amount actually in dispute. Holding back undisputed retention to apply pressure is exactly what the penalty targets.

Don’t let retention outlast your lien rights

Waiting on retention doesn’t pause your mechanics lien deadline. If retention is overdue and your lien window is closing, protect yourself by recording a lien rather than waiting indefinitely for the check.

This page is general information, not legal advice, and does not create an attorney–client relationship. California lien and notice deadlines are strict and fact-specific — “completion” alone can be triggered by actual completion, the owner’s occupancy or use, or a 60-day cessation of labor. Notice Harbor is not a law firm. Confirm any deadline that matters to your claim with a licensed California construction attorney. Retention deadlines and penalty amounts depend on the contract and the specific facts; confirm the figures for your situation with a California construction attorney.