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Lien waivers and retention
The four lien waiver types and when to sign each, plus how retainage works, what gets withheld, and the state caps that changed in 2026.
A lien waiver is a signed document in which a contractor, subcontractor, or supplier gives up its right to file a mechanics lien in exchange for payment. There are four types, combining conditional or unconditional with progress or final. Retention, or retainage, is money the owner withholds from each payment until the work is complete.
- Lien waiver types
- Conditional / unconditional, progress / final
- Private retention (ASA / Clemson study, Bausman 2004)
- 7.59% withheld
- California private cap (effective Jan 1, 2026)
- 5% of each payment
- New York private cap (SB 5655)
- 5% on contracts over $150,000
The trade
What a lien waiver actually does
A mechanics lien is a claim against the property that a contractor, subcontractor, or supplier can file when it is not paid for work or materials. It is powerful, so owners and lenders want it released as they pay. A lien waiver is that release: you sign away lien rights for the amount being paid.
The risk lives in the timing and the type. Sign an unconditional waiver before the check clears and you have given up your lien rights for money you do not yet have. Getting the waiver type right for each payment is the single most important habit in construction receivables.
The four types
The four lien waivers, and when to use each
Conditional progress waiver
Releases lien rights for a progress payment only once that payment actually clears. The safe waiver to sign when you are still owed money and billing continues.
Unconditional progress waiver
Releases lien rights for a progress payment immediately, whether or not the check clears. Sign only after you have confirmed the funds.
Conditional final waiver
Releases all remaining lien rights on final payment, effective only when that final payment clears. Use at project closeout before the money lands.
Unconditional final waiver
Releases all lien rights outright. Only appropriate once the final payment, including retention, is confirmed in hand.
The withheld money
How retention works
Retention, also called retainage, is a percentage the owner holds back from each progress payment as security that the job will be finished and corrected. Across private projects the average withheld is 7.59 percent, higher than the 5.56 percent average on state work and the 3.26 percent on federal work, and subcontractors typically have more withheld than general contractors.
The problem is how long it sits. On private jobs, general contractors wait about 99 days to collect retention and subcontractors about 167 days, so the last slice of profit on a job is often the slowest money to arrive. That lag is why retention tracking is a core part of construction receivables.
What changed in 2026
State caps on retention
Several states cap how much can be withheld. California, long a 5 percent cap on public works, extended a 5 percent retention cap to private construction contracts entered into on or after January 1, 2026, limiting both each progress payment and the aggregate. New York, under SB 5655 signed in December 2025, caps retention at 5 percent on private contracts over $150,000.
Caps vary widely by state and by public versus private work, and some states also set deadlines for releasing retention after completion. Because the rules differ so much, confirm the cap and the release timeline for the specific state and project type before you agree to a retention clause.
Frequently asked questions
What are the four types of lien waivers?
Conditional progress, unconditional progress, conditional final, and unconditional final. Conditional waivers take effect only when payment clears; unconditional waivers take effect immediately. Progress waivers cover a single payment; final waivers release all remaining rights at closeout.
What is the difference between a lien waiver and a lien release?
The terms are often used interchangeably. Strictly, a lien waiver is signed at the time of payment to give up the right to file a lien, while a lien release discharges a lien that has already been recorded. Both reduce the claim against the property.
Should I sign an unconditional lien waiver before I am paid?
No. An unconditional waiver gives up your lien rights immediately, even if the payment never arrives. Sign a conditional waiver while you are waiting on the check, and only sign unconditional after you have confirmed the funds cleared.
What is a normal retainage percentage?
Historically around 10 percent, though it varies. The ASA and Clemson University study (Bausman, 2004) put the figure at 7.59 percent on private projects, 5.56 percent on state projects, and 3.26 percent on federal projects. Several states now cap it at 5 percent.
Is there a cap on retention?
In some states, yes. California caps retention at 5 percent on public works and, for contracts entered on or after January 1, 2026, on private works too. New York caps it at 5 percent on private contracts over $150,000. Many states set no cap, so it is contract-driven.
When is retention released?
Usually at substantial or final completion, once the work is accepted and any punch list is corrected. On private jobs the wait averages about 99 days for general contractors and 167 days for subcontractors, and some states set a statutory release deadline.
Why do subcontractors have more retention withheld?
Retention flows down the contract chain. The owner withholds from the general contractor, who in turn withholds from subcontractors, so a sub can have retention held at multiple levels and wait the longest to be made whole.
Stop losing track of retention and waivers
Buildalytic tracks retention withheld across every job, flags waivers that need to move with a payment, and shows you exactly how much money is sitting in retention and how old it is.