If you are a general contractor running private commercial work in New York, a contract clause you have used for years may now be legally unenforceable. New York's retainage cap has had teeth since 2023, but a quiet drafting gap let owners and GCs write around it. As of December 2025, that gap is closed. Here is what changed, why it matters to your pay cycle, and how to keep your waiver process in step with the new rules.
What New York's Retainage Cap Now Requires
New York's retainage rules live in the Prompt Payment Act (General Business Law, Article 35-E). Two laws now work together:
- The 2023 law (Senate Bill 3539, signed November 17, 2023) amended GBL §§ 756-a and 756-c. On private construction contracts of $150,000 or more, it capped retainage at 5% of the total contract sum, let a contractor submit a final invoice upon reaching substantial completion (rather than waiting for final completion), and required retainage to be released no later than 30 days after final approval of the work.
- The 2025 amendment (Senate Bill 5655, signed by Governor Hochul on December 19, 2025) amended GBL § 757 to make any contract provision that requires retainage above 5% void and unenforceable.
That second step is the whole story. The 2023 cap set the number, but because the 5% limit was not listed among the "void provisions" in § 757, a contract could still purport to require 8% or 10% retainage, and parties were left to argue about it. SB 5655 puts excess-retainage clauses on the void list directly, so a clause demanding more than 5% simply has no effect — there is nothing left to negotiate. (Holland & Knight and Peckar & Abramson both walk through the change.)
The amendment applies to contracts entered into on or after December 19, 2025. Existing contracts are governed by the prior framework, so the practical effect lands as you sign new work in 2026.
Why This Matters Down the Payment Chain
Retainage is the slowest money on any job. A 5% cap instead of 10% roughly halves the cash a subcontractor leaves on the table mid-project — money that, under the old loophole, could sit unreleased for a year or more on a long build. The New York rules push that cash back into the chain on two fronts at once:
- A lower ceiling. No private contract of $150,000+ can hold more than 5%, top to bottom.
- A release clock. Retainage must move within 30 days of final approval of the work, and late release accrues interest at 1% per month on the amount withheld.
For a GC, the cap flows in both directions. You cannot have an owner holding 5% from you while your own subcontract holds 7% from a sub — the excess clause is void, and you are now exposed to interest if you sit on retainage after you have been paid. The discipline the statute demands is the same discipline that protects you from a lien: release on a clock, and document every release.
| Before SB 5655 | After SB 5655 (contracts ≥ $150k) | |
|---|---|---|
| Max retainage | 5% cap on the books, but excess clauses were arguable | 5% — any clause requiring more is void |
| Final invoice | At substantial completion (since 2023) | At substantial completion |
| Release deadline | 30 days after final approval of work | 30 days after final approval of work |
| Late release | 1% per month interest | 1% per month interest |
Where Lien Waivers Fit
A retainage release and a lien waiver are two halves of the same handshake. When you finally pay out that withheld 5%, you want an unconditional waiver for the amount in hand — and you want it timed so you are never holding a signed waiver for money that has not actually moved, or releasing money against a waiver you never collected.
This is exactly the failure mode that bites GCs: paying retainage in full and still facing a lien because the waiver was the wrong type or was signed a beat too early. If that distinction is fuzzy, read our explainer on conditional vs. unconditional lien waivers before your next retainage cycle.
The cleaner approach is to couple the payment and the waiver so neither can get ahead of the other. SureHold is built around that idea: a lien-waiver escrow flow where the signed waiver and the payment release in lockstep. SureHold is the only self-serve, transparently priced product that couples a payment to a signed waiver this way — other platforms have versions of the mechanism, but they are quote-only and enterprise-priced. For the broader picture of what waiver automation does for a GC's back office, see our overview of lien waiver software.
A note on the documents themselves: SureHold provides waiver templates for all 50 states, with California on its verified statutory form and the other states on general templates under legal review. New York does not prescribe a single mandatory statutory waiver form the way California does, so flexibility matters — you can preview and generate a waiver free with our lien-waiver generator, or read the state-specific notes on our New York lien waiver page.
A Practical 2026 Checklist for New York GCs
For private contracts of $150,000 or more signed on or after December 19, 2025:
- Audit your subcontract templates. Any retainage clause above 5% is now void. Strike it before it confuses a sub or invites a dispute — the number to write is 5%.
- Mirror the cap downstream. Do not hold more from a sub than the owner holds from you, and never more than 5%.
- Set a 30-day release trigger. Build a reminder off "final approval of work," not the project close-out party. The 1% monthly interest accrues whether or not anyone chases you.
- Pair every retainage payment with the right waiver. Conditional before the money clears, unconditional once it has. Keep the timestamped, signed record.
- Run the math on freed-up cash. A 5% ceiling and a hard release clock change a project's cash curve. If you want to see what tighter retainage and waiver turnaround do to your carrying costs, our ROI calculator puts numbers to it.
The Takeaway
New York did not invent a new number in 2025 — it made the old one stick. The 5% retainage cap was always there; SB 5655 finally made any contract that ignores it unenforceable. For GCs, that means cleaner subcontracts, faster cash down the chain, and real interest exposure if you sit on retainage after final approval. The teams that come out ahead will be the ones whose waiver and payment process already moves on a clock. If that is the process you want to build, start with SureHold.
Disclaimer: SureHold is not a law firm, and this post is not legal advice. Statutes, deadlines, and thresholds change and apply differently to each contract. Confirm the current text of New York's Prompt Payment Act and consult qualified construction counsel before acting.
Sources
- New York Senate Bill S5655 (2025–2026) — primary source for the 2025 amendment to GBL § 757.
- New York Senate Bill S3539 (2023–2024) — primary source for the original 5% cap and 30-day release rules.
- Holland & Knight — "New York Closes Retainage Loophole: SB 5655 Voids Excess Retainage Provisions"
- Peckar & Abramson — "New York Amends Prompt Payment Act: Retainage Above 5% Now Void"
- Duane Morris — "New York's 5 Percent Retainage Bill for Construction Contracts Signed into Law"