What is retention in construction?
Retention is a percentage your main contractor keeps back from each payment to you, as security against defects, and pays back later in parts.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Your subcontract sets the percentage, such as 3 or 5 per cent, and often a limit on the total held. It comes off the gross value in every certificate, so the sum held grows as the job goes on. It is usually paid back in two parts. The first is often released at practical completion, and the rest at the end of the defects period. Your subcontract decides the split, the events and any certificate each release waits for. Retention is still your money. It is held against defects you might leave, not taken off as a discount. But it only comes back if someone asks for it, on the right date, with the right evidence. Most retention that is lost is never refused: the job finishes, the team moves on and nobody asks. Some is lost when a main contractor becomes insolvent while holding it. The Government has proposed banning cash retentions, but for now your subcontract's terms apply. So record what is held after every certificate, and put both release dates in a diary the day you sign.
Example
Illustrative example. The scenario and figures are invented.
The facts
A groundworks subcontractor signs a £400,000 subcontract with 5 per cent retention. Half is released at practical completion and half at the end of a 12-month defects period.
What happens
- Each certificate keeps back 5 per cent of the gross value, so £20,000 is held by the end of the job.
- At practical completion the first £10,000 falls due, and the subcontractor asks for it in the next application with the certificate attached.
- The second £10,000 goes in the diary for the end of the defects period, 12 months later.
The retention in figures
| Item | Amount |
|---|---|
| Subcontract sum | £400,000 |
| Retention held at 5 per cent | £20,000 |
| Released at practical completion | £10,000 |
| Released at the end of the defects period | £10,000 |
The outcome
Each half is asked for on the day it falls due, with its evidence attached, so neither is left on the main contractor's ledger.
If retention is already overdue, Retention Claim gets it back; Retention Loss Prevention makes sure each release on your next jobs is asked for on time.