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The short version

For private project contracts signed on or after August 12, 2026, Colorado law lets you post a retainage bond and get your retainage released early. The law is C.R.S. § 38-46-103(1)(b). Below we explain how it works, what it means for your contracts, and what to do now.

How a retainage bond works

  1. Buy the bond. You get it from a surety licensed in Colorado. The bond protects against incomplete or defective work. It covers your retainage amount. 
  2. Give it to the party above you. If you are a general contractor, that is the owner. If you are a subcontractor, it is the general contractor.
  3. Get your retainage released. The party above you releases the held-back money in exchange for the bond. If a change order raises the contract price, you can amend the bond or buy a new one to release the extra retainage.
  4. If you default, they can claim on the bond. The bond's terms set the claim process. As with other bond types, the surety will investigate claims and pay out to the extent required by the bond. 

What this means for your contracts

  • Those above you generally have to accept your bond. If the surety meets the financial strength rating the contract requires, the party above you must accept the bond and release the retainage. They can require a rating of up to A-.
  • Subcontractor can submit a bond even where a general contractor has not. Assuming compliance with the statute and other contractual obligations, a subcontractor can submit a bond to the general contractor for retainage regardless of whether general contractor submitted a bond to the owner. 
  • Contracts can require bonds. Parties are free to make retainage bonds mandatory.
  • The new law is not clear on whether contracts can ban bonds. Ideally, the new statute would state, outright, whether the new rights it establishes can be modified by contract. It does not do that, though. The prudent course is to plan to accept them as outlined in the statute. 
  • Premium costs can be passed down. A general contractor can charge subcontractors a proportionate share of the bond premium, subject to the subcontract's terms.
  • Other rights are generally unaffected. Retainage bonds do not affect anyone's lien rights or cap recovery at the amount of the bond. 

Upsides and Downsides

Owners

  • Upside: Owners keep financial protection, and may see fewer retainage disputes, with a lower risk of contractor default, since cash flow improves.
  • Downside: Collecting from a surety takes time and effort, and a surety is not guaranteed to pay. 

General contractors & Subcontractors 

  • Upside: full payment sooner, which improves cash flow.
  • Downside: the premium is an added project cost. A claim can also hurt your future bonding capacity. Some owners who prefer to hold retainage may push back on efforts to submit retainage bond. For general contractors, they may find themselves in a complicated position where a subcontractor submits a retainage bond on a project where the general contractor has not bonded its retainage to the owner. 

What to do now

Review your construction contracts and update them for each project so they:

  • Talk to your surety or broker now about availability, underwriting, and the like. 
  • State the surety financial strength rating you will require or accept.
  • Explain how a bond is submitted, approved, and amended.
  • Say who pays the bond premium.
  • Spell out each party's rights and duties if a claim is made on the bond.
  • Address who pays legal fees if there is a dispute.
  • Reflect the risks of retainage bonds in your contract price.

Ultimately, though, every project and set of contracts are going to present unique circumstances and risks. 

If you have questions about the new law or want help updating your contracts to comply with it, reach out to Nick Herrick at [email protected] and Dan Wennogle at [email protected].