Retention, and how to actually get it back

How it works in practice

The percentage is deducted from each interim payment as you go, so by the end of a job the contractor is holding a few percent of the whole value of your work. On a £40,000 subcontract at 5%, that is £2,000 sitting with somebody else.

The first release, usually half, comes at practical completion of the main works. Note that this is the whole project's practical completion, not the day you finished your bit. On a long job that can be many months after you left site.

The second half comes at the end of the defects liability period, also called the rectification period, which typically runs six or twelve months from practical completion. So the tail on a job you finished in March can easily run into the following year.

Why it goes missing

Nobody sends it to you. Retention release is almost never automatic in practice, whatever the contract says. It gets released when it is applied for.

The dates are invisible. Your part of the job finished on a date you remember. The dates that matter are practical completion of the whole project and the end of the defects period, and unless you asked, you do not know either of them.

By the time it is due you have moved on. Twelve months later you have done sixty other jobs, and the amount is small enough to feel not worth the phone call and large enough to be genuinely annoying to lose.

And sometimes the contractor is gone. Retention is not held in trust unless the contract says it is, so if the main contractor becomes insolvent you are an unsecured creditor for your own money and will usually see little of it.

The five things that get it back

None of this is complicated. It is all record-keeping done at the moment you are least interested in doing it, which is the day you finish and want to be on the next job.

• Agree the percentage and the release dates in writing before you start, and get a cap in there if you can. Retention on labour-only work is worth pushing back on.
• Track the running total. Every deduction on every payment certificate, added up, in one place. If you cannot say what you are owed to the pound, you will not chase it.
• Ask for the practical completion date in writing as soon as your part is done, and ask again when you hear the job has finished. That one date sets both releases.
• Diary both release dates the day you learn them, with a reminder a fortnight before each. This is the single highest-value habit in the whole subject.
• Invoice for it. Retention becomes a debt when it falls due, so raise an invoice with its own number and its own due date rather than sending an email asking about it. An invoice enters their payment process; an email enters somebody's inbox.

It is a debt like any other once it is due

This is the part subcontractors talk themselves out of. Once the release date has passed and the money has not come, unpaid retention is simply an unpaid invoice, and everything that applies to an unpaid invoice applies to it.

On a construction contract covered by the Construction Act, the payment notice regime applies to retention release too. If they did not serve a payment notice and did not serve a pay less notice, the sum you applied for is the notified sum and is payable in full.

It is a commercial debt, so statutory interest at base rate plus 8% and the fixed compensation sum apply. And if it comes to it, retention is claimable in the county court on exactly the same footing as any other invoice.

The reason to know this is not that you will end up in court over £900. It is that a retention chaser who mentions the notice dates and the statutory position gets paid, and one who asks whether there is any news does not.

Whether to accept retention at all

On a large subcontract with a substantial contractor, retention is normal and refusing it may cost you the work. On a small job it is often worth asking to be waived, and it is asked for far less often than it is agreed to.

The alternatives worth knowing about are a retention bond, where a surety guarantees the amount instead of the contractor holding cash, and a project bank account, where money is held outside the contractor's balance sheet and is therefore safe from their insolvency. Both are more common on public and larger private work than on the jobs a one-person business takes, but knowing they exist is what lets you ask.

The honest position for a sole trader is this: retention is a working capital loan you are making to a business you cannot see the accounts of, at zero interest, for up to eighteen months. That is a reasonable thing to accept from a solid contractor on a good job, and a bad thing to accept by default from anyone who asks.

Common questions

How much retention is normal in UK construction?

Between 3% and 5% of the value of the work, deducted from each interim payment. Anything above 5% on a subcontract is worth questioning before you sign.

When should retention be released?

Usually half at practical completion of the main works and half at the end of the defects liability period, which is commonly six or twelve months after that. The dates come from the contract, and the first one depends on the whole project finishing rather than on the day you left site.

What if the contractor will not release my retention?

Treat it as an unpaid invoice, because that is what it is once it falls due. Raise an invoice for it, check whether they served the payment and pay less notices the Construction Act requires, add statutory interest and fixed compensation as a commercial debt, and escalate through a letter before action if it stays unpaid.

Do I lose my retention if the contractor goes bust?

Usually most of it, yes. Retention is not held in trust unless the contract expressly says so, so on insolvency you rank as an unsecured creditor for your own money. That risk is the argument for tracking how much exposure you have with any one contractor rather than discovering the total afterwards.

Can I refuse to have retention held?

You can always ask, and on smaller subcontracts it is agreed to more often than people expect. On larger work the realistic options are a retention bond or a project bank account rather than no retention at all.

Do the maths

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