Georgia Retainage Laws for Commercial Roof Contracts

Georgia contractors in commercial roofing find themselves with massive amounts of cash trapped in retainage accounts all the time. We're talking hundreds of thousands of dollars in plenty of cases - money that could be covering payroll and materials or help fund the next job. Georgia state law actually puts strict caps on retainage amounts, and it spells out when you're supposed to get that money back. These laws were created to protect your cash flow and make sure money moves through your business the way it should. All these protections are worthless, though, if nobody explains what they are or teaches you how to actually use them.

A contractor finishes up a massive 40,000-square-foot TPO installation, and everything looks perfect. They submit the invoice for retainage release and then silence. 30 days pass without payment. 60 days go by with nothing. Day 90 rolls around, and the contractor still hasn't seen a penny. The property owner keeps mentioning minor list items that supposedly need attention. Or they bring up vague warranty problems that make no sense whatsoever. As this happens, the statutory clock is supposed to run, and interest penalties should accumulate every day. The contractor could claim those penalties right now if they knew how. The problem is that they need to know how to start that clock in the first place.

Georgia's retainage laws put a hard limit on the percentage that can be held back from any payment. They've also spelled out when that money has to be released based on project milestones. And if a company holds onto the retainage money longer than they're supposed to, the law hits them with heavy financial penalties. The problem is that the laws only work when contractors have perfect records from the first day of the project. Even then, they have to move fast the second that a payment doesn't show up on time.

Georgia's retainage laws for commercial roofing contracts work in a very particular way. Let's talk about retainage on commercial roofing projects!

The 10% Retainage Rule in Georgia

Georgia actually regulates how much money property owners are allowed to withhold from their roofing contractors, and these requirements are fairly rigid. The statute that governs this whole process is O.C.G.A. § 13-11-6, and it limits retainage on commercial projects to a maximum of 10% of each payment. This particular requirement applies to every commercial roofing contract throughout the state.

Property owners occasionally try to hold back more cash than the law permits. Some want to hold onto 15% or 20% of the payment because roofing work makes them nervous. Too bad for them - the law has already set boundaries on this matter. Your concerns about future leaks won't change the laws. Neither will tricky materials nor tough installation methods matter. The law caps retention at 10% and the limit stays firm.

Contracts can set retainage below 10% as long as the two parties agree to the terms. I've seen plenty of jobs where it's only 5% and contractors with strong track records sometimes negotiate deals with zero retainage. The law is explicit on this, though - any creative language that anyone tries to slip into a contract, the retainage can never go above that 10% ceiling.

Property owners sometimes try to sidestep this limit with creative contract language. Some will rename the withheld money as a "materials deposit" or "project reserve fee." Others structure their payment schedules to hold onto more money in their pockets for longer periods. Georgia courts have time and time again shot down these workarounds, though, and they're not shy about it.

The cap exists for good reasons if you actually dig into it. Contractors have to pay their crews every week, and they need cash on hand for the materials for whatever job is coming up next. Property owners want some assurance as well, and rightfully so. They also need to know that the roof work is going to last before they hand over every last dollar. The 10% hits a nice balance where the two parties get what they need and nobody gets squeezed too hard financially. Georgia's cap is actually higher than that of a few other states, which only allow 5% for commercial projects.

When You Get Your Retainage Back

Georgia caps retainage at 10% for commercial roof contracts, and even though that percentage is pretty simple, the law itself has specific requirements. The state set up a two-phase system that's meant to get contractors their money back faster than the old way used to work.

The mechanism itself is actually pretty smart. Once a roofing project hits the 50% completion mark, the retainage rate automatically drops to only 5% for every payment that follows. So if the owner has been holding back 10% on the first half of your work, they can now only withhold 5% on everything else from that point on. This reduction in retained funds gives contractors access to more of their money right when project costs start to pile up.

After the project is done, the owner gets 30 days to pay you that retainage money they've been holding. It's not 60 days or 45 days. They can't simply pay it whenever they feel like it. Georgia law gives them a full 30 days, and the clock starts when you notify them in writing that the work is substantially finished.

Weather delays and change orders are going to throw off your timeline, no matter how well you plan. Just 1 week of storms can push everything back, and if the owner decides that they want something different halfway through, your whole schedule has to adjust. Documentation is where you really need to stay on top of everything. Photos with timestamps are essential, and you'll want inspection reports from third parties and progress records that show just what you've accomplished. A lot of contractors who work on large commercial roofs have actually started to use drone footage because it captures the work from angles that give you a much better view of what's been completed.

All this documentation has a good reason behind it. Some property owners will intentionally drag their feet on accepting the final completion of a project because once they accept it, that 30-day payment clock starts ticking. They'll nitpick small details or ask endless questions about the work just to delay their acceptance and hold onto that retainage money for as long as possible. Quality photos, thorough reports and plenty of documentation of your progress give you the evidence that you need to push back against these delays and to actually get paid on time.

Retainage and Warranty Holdbacks Are Different

The roofing job is finally done, and the work looks perfect. Payment should be in your account within a few days. The property owner calls with a different plan, though - they want to withhold part of the payment for possible warranty claims. Contractors everywhere know how stressful and frustrating these situations can become.

Retainage and warranty holdbacks are two different arrangements, and I get why contractors sometimes confuse them. Retainage is a way to guarantee that you finish the work you promised. Once your roof passes inspection and the owner signs off that everything looks right, you get that retainage money back. Warranty holdbacks work differently, though. These funds stay on hold specifically to cover any defects or problems that might show up months or years after you've finished the job.

Georgia courts have been strict about this particular issue for years. The Choate Construction case set a precedent that property owners can't hold onto retainage funds and then turn around and say they need it for warranty protection. The law says that they need to release that money after you've completed the work based on the contract. If they want warranty protection, they need to set that up as a separate agreement.

A new TPO roof system usually comes with a standard 20-year manufacturer's warranty, and that's great for the property owner. But they can't hold your retainage for the next two decades just because the warranty lasts that long. Commercial roofing warranties vary quite a bit in length anyway. Modified bitumen systems usually have about 15 years of coverage. EPDM roofs usually have warranties that last 25 years or longer in some cases. Property owners sometimes try to hold onto your money right now because they're worried about a leak that could maybe happen next year - but that's not what retainage is for at all.

A decent contract separates retainage and warranty protection, and it spells out the exact dollar amounts for each one. They each have their own release dates, too, and they're meant for different purposes.

Your Lien Rights for Retainage Payment

Retainage disputes and lien rights go together in Georgia, and the way they connect to one another is something every contractor needs to know about. Georgia gives contractors some strong legal tools so you can get paid what you're owed. The timeline for these tools is extremely strict, though.

The preliminary notification deadline gets lots of contractors into trouble. You have just 30 days to send that notification. The clock starts on your first day at the job site. Not when payment problems pop up. Not when the owner holds back your retainage. The 30-day window opens when you show up to work. Missing that notification deadline could mean losing your lien rights forever.

Retainage that an owner doesn't release once you've finished the job is valid grounds for a mechanics lien. Legally speaking, retainage is like any other money that you're owed on a project. An owner might hold back $10,000 in retainage past the deadline, and you have every right to file a lien for the entire amount.

At this stage, you have two legal paths available. A mechanics lien is one option, and it attaches directly to the property itself. Your other choice is a breach of contract lawsuit that focuses on the owner personally. These two routes work for different scenarios, and the best one depends on what actually happened with your project.

Property owners don't like having liens on their property for an obvious reason. A lien messes up the title and can stop them from refinancing or selling. I've seen plenty of property owners who swore they had no money for retainage payments somehow find it the second that a lien shows up in public records. The money just shows up out of nowhere. It's actually interesting how fast payments come through when you file that lien paperwork.

The 90-day window to file a lien kicks in on the last day of work at the project site. This deadline won't budge, and retainage payments that come weeks or months later don't change anything. Lots of contractors think about when the retainage gets released and lose track of their lien deadline.

Penalties That Add Up Fast

Georgia law is on your side when a property owner won't release your retainage without a legitimate reason. The penalty is pretty big, and it builds up fast - we're talking 1% monthly interest that the state tacks on automatically. Let's say that you have $50,000 in retainage tied up from a commercial roofing project, and the owner is stalling. Every month that they wait means another $500 that they owe you on top of what was already yours.

Commercial projects are where the retainage numbers actually start to add up in a significant way. When you hit that $100,000 retainage mark or higher, the monthly penalties alone can be worth $1,000. If a project runs six months behind schedule for whatever reason, that delay translates directly into $6,000 in penalty payments that the owner owes you. The way these penalty structures are set up actually benefits you as the contractor in a pretty significant way.

The Georgia courts have become much tougher on property owners who hold back retainage without a valid reason. A few recent appellate decisions now make these owners cover the attorney fees on top of the interest penalties that they already face. The financial math here gets ugly fast for owners who try to play games with your money. Not only do they pay the penalty interest, but they also have to foot the bill for your lawyer. The courts have drawn a pretty obvious line between legitimate concerns about the work quality and owners who just want to hold onto your cash in their bank account for a few extra months.

Your documentation becomes really important at this point. Every email that you send about the retainage strengthens your paper trail. Phone calls need to be documented and summarized, too, because they strengthen your position. When property owners see a long history of payment requests and denials in front of them, they usually figure that it's time to pay up and move on.

Protect The Roof Over Your Head

Legal protections are worth having for contractors. But they're worthless if you don't have the right documentation to back up your claim. Payment practices in construction have improved dramatically over the past decade, and most of that improvement has happened because contractors finally learned what they're entitled to and started demanding it. Retainage problems are usually the first warning sign that bigger payment problems are brewing on a project. Experienced contractors can recognize these warning signs early and usually consult with a construction attorney before the situation gets worse, especially if the contract terms seem questionable from the start.

You have worked hard for that money, and the great news is that Georgia law also protects your right to get paid right after the job is done.

Colony Roofers knows roofing inside and out - the physical work and the business side of it. We've been at it for years across Georgia, Florida and Texas. From big commercial buildings to small residential homes, the project size doesn't faze us. We manage the whole process from your first estimate request through to the final payment. Your roof is one of the biggest investments in your property, so you need to have contractors who actually know their trade. Schedule a free inspection with us and you'll soon see why property owners and general contractors count on us.

Our team has the skills and experience needed for any roofing challenge, as we protect your interests the entire time. Get in touch with us at Colony Roofers today for a free roof inspection!