Colorado Retainage Bond Law Took Effect August 12. What It Covers and What It Does Not

Since August 12, 2026, a Colorado contractor or subcontractor on a covered private construction job can tender a surety bond in place of retainage. When the bond meets the law's requirements, the party that would hold the retainage must accept the bond and release the retainage it covers. The law is House Bill 26-1311, signed May 7, 2026. It adds a paragraph to the part of Colorado law that already capped retainage at five percent.

This article is about getting paid. It is not a licensing law, and nothing in the act mentions a contractor license. It covers what the act says, which jobs it reaches, who has to accept a bond, and what the act leaves unanswered. The last section is for companies that want to work in Colorado, where licensing runs through cities and counties. For that side, start with the Colorado contractor license page.

At a glance

• The law: House Bill 26-1311, Chapter 129 of the 2026 Colorado session laws, "Concerning the use of a bond in lieu of retainage in construction contracts."
• Dates: signed May 7, 2026. In effect August 12, 2026, for contracts created on or after that date.
• The option: in place of retainage, a contractor or subcontractor may tender a retainage bond of up to five percent of the money earned.
• Who must accept: the property owner, contractor or subcontractor that would hold the retainage, when the bond meets the act's requirements. They must release the retainage the bond covers.
• The bond: a surety bond from an insurer licensed to issue it in Colorado. The owner or contractor may require a minimum A.M. Best rating, but not above "A-".
• Not covered: property owned by a public entity, including public-private partnerships. The article this sits in also leaves out a single contract for one single-family home or one multifamily building of up to four units.

What the law changed

Colorado already limited retainage on the private jobs that article 46 of title 38 covers. Section 38-46-103(1)(a) says a property owner, contractor or subcontractor "shall not withhold as retainage more than five percent of the price of the work completed under the contract or subcontract." That cap came from House Bill 21-1167, signed May 17, 2021. House Bill 26-1311 leaves it in place.

What House Bill 26-1311 adds is a choice. Section 38-46-103(1)(b)(I) says: "In lieu of retainage, a subcontractor or contractor may tender a retainage bond in an amount not to exceed five percent of the money earned by the subcontractor or contractor."

For example, on a job where $200,000 of work is done, five percent is $10,000. That is the most that can be held back as retainage, and the most the bond can be. That is arithmetic on the statute's numbers, not a figure from the act.

Who has to accept the bond

The act uses the word "shall." If the contractor or subcontractor tenders a retainage bond that meets the act's requirements, "the property owner, contractor, or subcontractor shall accept the retainage bond and release the retainage covered by the retainage bond." Another paragraph says it again: the contractor or property owner "must accept a bond meeting the requirements."

The act does not set a number of days for the release. It says the retainage the bond covers is released, and it stops there.

What the bond has to be

The act defines a retainage bond as a surety bond issued by an insurer licensed to issue the bond in Colorado. It is assurance for the person accepting it that a contract or subcontract will be satisfactorily completed, or that goods, materials or equipment meet the specifications needed for satisfactory performance.

The contractor or subcontractor tendering the bond must also faithfully perform all the provisions of the contract or subcontract and pay all laborers, suppliers and subcontractors the amounts owed under it.

The property owner or contractor may require that the surety carry a minimum A.M. Best financial strength rating. The required minimum cannot be higher than "A-".

Lien law reaches the bond too. The act says the bond and its proceeds "are subject to a claim and lien in the same manner and priority" as set out in article 22 of title 38.

Subcontractors and the premium

Two paragraphs speak to the middle of the chain. When a property owner accepts a bond in lieu of retainage from a contractor, the contractor must accept a "like bond" from any subcontractor that submits a bond in lieu of retainage. The act defines a like bond as one that is substantially equivalent to the bond the contractor or subcontractor submitted above it.

The act also says the contractor may withhold the subcontractor's portion of the bond premium, to the extent the contractor provides a retainage bond to obtain a release of the subcontractor's retainage.

Which jobs it reaches

The added paragraph sits inside article 46 of title 38, so that article's coverage is the starting point. Article 46 applies to:

• a contract with a price of at least $150,000 made between a property owner and a contractor;
• a subcontract under that kind of contract, even if the subcontract price is under $150,000; and
• a supply agreement for materials, goods or equipment used to perform that kind of contract, even if the supply agreement price is under $150,000.

In article 46, a property owner means a private person with an interest in real property, including a leasehold interest.

Article 46 does not apply to a single contract that governs the building of one single-family dwelling or one multifamily dwelling with no more than four family dwelling units. It does not apply to a contract with a public entity.

The bond option adds its own public property exemption. It does not apply to a contract or subcontract that concerns property owned by a public entity, and that includes a contract or subcontract that results from a public-private partnership.

The act applies to contracts created on or after August 12, 2026. It says nothing about older contracts.

How any of this lines up with one specific job is a question for a Colorado construction attorney.

What the act does not say

Reading the full text, a few things people may expect are not there:

• A deadline. There is no number of days for releasing retainage after a bond is tendered.
• A cost. The act gives no price or rate for a bond and does not name a surety.
• Contract terms. It does not say whether a contract may require a bond or forbid one. Womble Bond Dickinson, a law firm that wrote the act up on October 29, reads it as unclear on whether a contract can ban bonds. The firm advises planning to accept them. That is the firm's reading and not the act's words. Section 38-46-103(2), which came with the 2021 act, says article 46 addresses only the amount of retainage that may be withheld and does not change, override or invalidate other provisions of a contract, including payment timing. How that fits with the added paragraph is a question for an attorney.
• Licensing. The only license in the act belongs to the insurer. It says nothing about a contractor's license, registration or qualifier.

Do not mix it up with a license bond

A retainage bond is tied to one contract: the act defines it by the contract it assures. It is not a license bond, and it is not a licensing requirement of any kind. Our Colorado page lists "No state net worth, bond or financial statement for GC" in its requirements table. Cities and counties set their own rules for the general contractor licenses they issue.

If you want to work in Colorado, licensing is city by city

The act says nothing about licensing, but a contractor looking at Colorado work has a second set of rules to learn. Our Colorado page puts it this way: "Colorado has no statewide general contractor license. General contractors are licensed by the city or county where the work happens, and Denver and most other municipalities run their own contractor licensing programs."

Some of what the page says:

• Denver issues building contractor licenses in four classes. Its application page requires a supervisor certificate, or an employee who holds one. Online applications take about 14 to 20 business days to review.
• "A Colorado license is only good in the jurisdiction that issued it, unless that city names another city's license as acceptable."
• At the state level, Colorado licenses electrical and plumbing work through the State Electrical Board and the State Plumbing Board, both housed in the Division of Professions and Occupations at the Department of Regulatory Agencies. HVAC and mechanical work is regulated locally, not by the state.
• An electrical company must employ a licensed master electrician, and a plumbing company must be tied to a responsible master plumber, as the qualifying individual.

Our Colorado page describes how we help: "We place a licensed qualifying agent with your company as a full time W-2 employee and prepare the qualifier filing with the Colorado Division of Professions and Occupations (DORA), State Electrical Board and State Plumbing Board." Contractor qualifier services explains more. The state board or the city decides every application, and approval is never a promise.

Frequently asked questions

When did Colorado's retainage bond law take effect? August 12, 2026. The governor signed House Bill 26-1311 on May 7, 2026, and the act applies to contracts created on or after the effective date.

How big can the bond be? The act says a retainage bond may be "in an amount not to exceed five percent of the money earned by the subcontractor or contractor."

Who has to accept it? When the bond meets the act's requirements, the property owner, contractor or subcontractor that would hold the retainage must accept it and release the retainage the bond covers.

Does it apply to public jobs? No. The bond option does not apply to a contract or subcontract that concerns property owned by a public entity, including one that results from a public-private partnership.

Does it apply to a single-family home? Article 46 of title 38, where the added paragraph sits, does not apply to a single contract that governs the building of one single-family dwelling or one multifamily dwelling with no more than four family dwelling units. Whether a remodel or an addition falls inside that exemption is a question for an attorney.

How fast does the retainage come back? The act does not say. It sets no deadline for the release.

Is this a contractor licensing law? No. The act is about payment. It never mentions a contractor license. Colorado has no statewide general contractor license, and general contractors are licensed by the city or county where the work happens.

This article is general education, not legal advice. A Colorado construction attorney or your surety can confirm how the act applies to a specific job.

Marshall Schofield, one of the nation's leading contractor exam prep instructors, has helped thousands upon thousands of contractors get licensed. Jeremiah Jaskulski is a licensed contractor who has lived the licensing process across multiple states. Together they founded The Licensing Company, and they help contractors get licensed the right way in Colorado and nationwide. Sources: House Bill 26-1311, Chapter 129, Session Laws of Colorado 2026, the General Assembly's HB26-1311 page, Legislative Council final fiscal note, August 25, 2026, House Bill 21-1167, signed May 17, 2021, Womble Bond Dickinson on JD Supra, October 29, 2026, and Woods Aitken, May 22, 2026.