California Codes, Civil Code - CIV, Division 4 — General Provisions, Part 6 — Works of Improvement, Title 2 — Private Works of Improvement, Chapter 8 — Prompt Payment, Article 2 — Retention Payment, Section 8811

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

(b)(1)(A) A retention payment withheld from a payment by an owner from the direct contractor, by the direct contractor from any subcontractor, and by a subcontractor from any subcontractor thereunder, for a private work of improvement, shall not exceed 5 percent of the payment.

(B) In no event shall the total retention proceeds withheld exceed 5 percent of the contract price.

(C) In a contract between the direct contractor and a subcontractor, and in a contract between a subcontractor and any subcontractor thereunder, the percentage of the retention payment withheld shall not exceed the percentage specified in the contract between the owner and the direct contractor.

(2) Paragraph (1) does not apply to a direct contractor or subcontractor if the direct contractor or subcontractor provides written notice to a subcontractor before, or at, the time that the bid is requested that a faithful performance and payment bond shall be required, and a subcontractor subsequently fails to furnish to the direct contractor or subcontractor a performance and payment bond issued by an admitted surety insurer.

(3) Paragraph (1) 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.

(c) In any action to enforce the provisions of this section, a court shall award reasonable attorney’s fees to the prevailing party.