California capped private construction retention at 5 percent. The carve-out covers most of the houses you wire.

Short answer: California now caps retention on private construction at 5 percent, and the cap applies at every tier, so the general contractor cannot hold 10 percent from you while the owner holds 5 percent from the general contractor. The rule is Civil Code 8811, added by SB 61, and it took effect January 1, 2026. Two things get left out of most of the coverage. It does not apply to a residential project that is not mixed-use and does not exceed four stories, which is a large share of the work a C-10 shop actually does. And it only applies to contracts entered into on or after January 1, 2026, so the multi-year job you signed in late 2025 is still running on the old terms right now.

If you work commercial tenant improvement, mixed-use, or anything taller than four stories, this is money that moves from the general contractor’s account to yours on every progress payment. If you sub on single-family and small multifamily, nothing changed for you and you should know that before you argue about it on a job.

What Civil Code 8811 actually says

The operative sentence is short. A retention payment withheld by an owner from the direct contractor, by the direct contractor from any subcontractor, and by a subcontractor from any subcontractor under that one, for a private work of improvement, “shall not exceed 5 percent of the payment.” A second sentence closes the obvious workaround: “In no event shall the total retention proceeds withheld exceed 5 percent of the contract price.”

So it is not 5 percent per draw with the total drifting upward. It is 5 percent of the payment and 5 percent of the contract price, both.

The third piece is the one worth writing down, because it can push your number below 5 percent. In a contract between the direct contractor and a subcontractor, and between a subcontractor and anyone under that subcontractor, the percentage withheld “shall not exceed the percentage specified in the contract between the owner and the direct contractor.”

Read that as a ceiling that travels down the chain. If the owner is holding 3 percent from the general contractor, the general contractor cannot hold 5 percent from you. Your ceiling is 3. Nobody is going to volunteer that number, so ask for it. On a job where the cap applies, the owner-to-general-contractor retention percentage is now a term of your subcontract whether or not it appears in your subcontract.

This language is not new to California. Public works have run under a 5 percent cap in Public Contract Code 7201 for years, with an escape hatch for projects a public agency formally finds to be substantially complex before bid. SB 61 brings private work in line, without the substantially-complex escape hatch.

The residential carve-out is the whole story for a lot of shops

Here is the subdivision that most of the write-ups mention in a clause and then move past: the 5 percent cap “does not apply to an owner, direct contractor, or subcontractor on a residential project if the project is not mixed-use and does not exceed four stories.”

Both conditions have to be true for the exemption to apply. Not mixed-use, and four stories or less.

Work through what that means for normal electrical work:

• Custom single-family home, you are subbed to the general contractor. Exempt. The general contractor can hold whatever your subcontract says.
• Tract housing, garden-style apartments, a two-story fourplex. Residential, not mixed-use, under four stories. Exempt.
• Five-story apartment building, all residential. The cap applies. It exceeds four stories.
• Four-story building with ground-floor retail and apartments above. The cap applies. It is mixed-use, so the story count never matters.
• Office tenant improvement, retail buildout, warehouse, medical office, private school. Not residential at all. The cap applies.

That last group is where this is worth real money. Tenant improvement is the electrical work where retention hurts most, because the contracts are short, the punch list drags, and 10 percent of a $180,000 TI package sitting for four months past energization is $18,000 you financed for somebody else. Cutting that to 5 percent is $9,000 back in your account on one job.

It is also worth being straight with yourself about the other half. If you wire houses, a general contractor who holds 10 percent from you in 2026 is not breaking this law. Arguing 8811 on a two-story custom home is a good way to be confidently wrong in front of somebody who writes your checks.

It only reaches contracts signed on or after January 1, 2026

Subdivision (a) is explicit: “This section is applicable to a contract relating to a private work of improvement entered into on or after January 1, 2026.”

Not work performed after that date. Not payments issued after that date. The contract date.

We are nine months in, which is exactly the window where this causes arguments. A commercial job that was signed in October 2025 and is topping out now is governed by whatever that subcontract says, and a change order written this month does not convert the original contract into a 2026 contract. If you want the cap, you need a new contract, not an amendment to an old one.

The practical version: when a general contractor sends you a subcontract on an existing project, check the date on the prime contract, not just the date on your own paperwork. And if you are being asked to sign a 2026 subcontract that recites 10 percent retention on a covered project, that term is unenforceable as written. You do not have to accept it just because it is printed.

The 10 percent bond exception is not in the statute

There is a second exception, and it is being quoted wrong all over the place.

The statute says the cap does not apply to a direct contractor or subcontractor if that contractor gave written notice to a subcontractor, before or at the time the bid was requested, that a faithful performance and payment bond would be required, and the subcontractor then failed to furnish a performance and payment bond issued by an admitted surety insurer.

A lot of law firm summaries and trade articles render this as “the retaining party may then withhold up to 10 percent.” That number is not in Civil Code 8811. The statute does not substitute a higher cap. It removes the cap for that relationship entirely. Whatever your subcontract says is what governs.

That distinction matters in the wrong direction for you. If you skipped the bond on a job where bonding was properly noticed at bid, do not assume your exposure tops out at 10 percent. Check what you signed. The other half of it is a reason to take the bond notice seriously at bid time rather than treating it as boilerplate, because furnishing the bond is what keeps the 5 percent ceiling in place.

What did not change, and it is most of the timeline

The cap is about how much can be held. Nothing in SB 61 touched how long it can be held, and those deadlines were already in your favor.

• Civil Code 8812. The owner pays retention “within 45 days after completion of the work of improvement.” If there is a good faith dispute, the owner may withhold from final payment an amount not in excess of 150 percent of the disputed amount.
• Civil Code 8814. Within 10 days after receiving all or part of a retention payment, the direct contractor pays each subcontractor from whom retention was withheld that subcontractor’s share. Same good faith dispute rule, capped at 150 percent of the estimated value of the disputed amount.
• Civil Code 8818. Wrongful withholding carries a penalty of 2 percent per month on the amount wrongfully withheld, in place of any interest otherwise due, and the prevailing party in a collection action is entitled to costs and reasonable attorney’s fees.

Note what the 150 percent rule does to the shape of this. A good faith dispute over $20,000 lets somebody hold $30,000, and that is a separate mechanism from retention. The 5 percent cap does not restrain it. If your money is not moving, the first question is whether you are looking at retention or at a claimed dispute, because they have different rules and different remedies.

Section 8811 also brings its own fee shifting, and the wording is stronger than usual: in any action to enforce the section, a court “shall award” reasonable attorney’s fees to the prevailing party. Not may. That cuts in both directions, so do not file on a residential four-story building because you skimmed a headline.

What to check on your next contract

• Ask for the owner-to-general-contractor retention percentage before you sign a subcontract on a covered project. It is your ceiling, and it can be lower than 5 percent.
• Date the prime contract, not just yours. Pre-2026 prime, pre-2026 rules, no matter when your piece was awarded.
• Classify the project honestly. Residential, mixed-use, and story count decide whether you have anything to say at all.
• Treat a bond notice at bid as a live requirement. Furnishing the bond is what preserves your 5 percent ceiling.
• Track the 45-day and 10-day clocks per job, because those are the deadlines with a 2 percent per month penalty attached and they did not change.
• Update your subcontract review checklist once, rather than trying to remember this on the week a $200,000 TI package lands. Related reading on pricing discipline: how to price electrical jobs without underbidding yourself.

Where the phone comes into this

Retention arguments almost never start at the end of a job. They start at the beginning, on a call where somebody described the project in four words and you priced it from that description.

“Tenant improvement, about 6,000 square feet” and “remodel on a four-story apartment building” sound like the same kind of call and now sit under two different retention rules. Whether the building is mixed-use, how many stories it has, and when the prime contract was signed are three questions that take ten seconds to ask and decide whether 5 or 10 percent of your contract sits in somebody else’s account for a quarter.

They are also exactly the questions that do not get asked when the call comes in while you are on a ladder. An intake that captures project type, story count, and who holds the prime contract puts the answer in the job file before you quote, instead of leaving you to reconstruct it during a payment dispute, the same intake discipline covered in what to ask on every electrical call. The same discipline that keeps you out of the CSLB citation minimums that went up in July is what protects the money on this one.

Five percent is not a dramatic change. On the jobs where it applies, it is half your retention, released on the same schedule as before, and it is yours whether or not the contract in front of you was updated to say so.