What Is Retention in a Building Contract?
In short
Retention in a building contract is a small percentage of each payment, held back by the client as security against defects. Part is usually released at practical completion and the rest at the end of the defects period, once any faults that appear after handover have been put right.
Retention is a common feature of building contracts. Each time the contractor is paid for work done, a small percentage is kept back by the client. The money held is security: if defects appear and are not fixed, the client has funds available to put them right. Once the defects are dealt with, the retention is paid to the contractor.
How retention usually works
- The percentage. It is agreed in the contract. On residential and smaller commercial work, figures between 2.5 and 5 per cent are common, but there is no fixed rule.
- First release. Typically half is released at practical completion, when the work is finished apart from minor snags.
- Second release. The remainder is released at the end of the defects period (often six or twelve months), once any defects that have appeared are fixed.
Standard forms such as the JCT contracts set out how retention is calculated, held and released. On a simpler home renovation contract, the terms should be written plainly so both sides know the amounts and dates.
Why retention exists
Some issues only appear after a home is lived in: hairline cracks as new plaster dries, a door that moves with the seasons, a grout line that needs attention, a radiator valve that weeps. The defects period gives time for these to surface, and retention gives the contractor a clear reason to return promptly and fix them.
Retention and the snagging list
Retention is linked to, but separate from, the snagging list. Snags are recorded at handover and should be closed out quickly. Retention covers what appears later. If a contract has no retention, it is reasonable to agree that a final payment is only made once the agreed snags are complete.
Things to agree before you sign
- The percentage held and whether there is a cap
- When each part is released and what triggers it
- How long the defects period runs
- How defects are reported and how quickly they will be attended to
Write these into the contract alongside your schedule of works and payment schedule, so nothing depends on memory at the end of the job.
How we handle retention and aftercare on London’s Prestige projects
Our contracts set out payment stages, the defects period and how aftercare works in plain English, so you know exactly what happens after handover. If something appears during the defects period, you contact the same project manager who ran your job, and we arrange a visit to put it right. We would rather earn the final payment by returning promptly than argue about it. See the kind of whole home project this applies to on our Hanover Place renovation, read about our full house renovation service, or arrange a site visit to talk about yours.
Common questions
How much retention is normal on a home renovation?
There is no legal standard. Between 2.5 and 5 per cent is common on building contracts, often split into two releases. Smaller domestic jobs sometimes use a final payment held until snagging is complete instead.
When is retention paid back?
Usually half at practical completion and the rest at the end of the defects period, once any defects reported during that time have been fixed.
Is retention the same as a deposit?
No. A deposit is paid by the client at the start. Retention is held back by the client from payments due to the contractor and released later.