Retention, and Getting the Second Half Back

Finished in week nine, paid in full somewhere around week ninety

The muck away went in week nine. Substructure, drainage runs, oversite and the last of the imported fill, signed off, backfilled, and a gang that has been on three other jobs since. The programme for the building above it runs to fifty weeks and it is already late. Every certificate since March has come back a few per cent short with the word retention against it, and the total of those few per cents is now a number the firm notices at the end of the month.

Nothing has gone wrong. That is the difficult part. Nobody has complained about the work, no set-off has been notified, no defect has been raised. The money is simply being held, correctly, under a clause somebody signed in February, and it will keep being held long after the last groundworker has forgotten which site this was. What the firm needs is not a grievance. It is three specific answers: how much is actually held, which event lets half of it go, and what physical document has to come into existence before the rest arrives.

Rebuild the held balance from your own invoices, once

The only running record of what is held is on the payer's system, in a format designed for the payer. A payment notice states a movement, not a balance; some state a cumulative retention figure and some do not; and a sub-contract ledger that has been through a change of quantity surveyor halfway down a fifty-week programme will not necessarily agree with itself. None of that implies bad faith. It implies that the person who cares most about the balance has never written it down.

So write it down, in one sitting, from your own applications and your own bank statements rather than from anything the payer has sent. Six columns and one row per certificate is enough, and it works because the retention column has a property nothing else on the sheet has: it must equal the contract rate applied to the cumulative certified value, capped, on every single row. A row where it does not is either an error or an undisclosed deduction wearing retention's name, and telling those two apart is the reason to build the sheet at all.

Do it once, early, on a job where retention is being taken, and keep it as the job runs. Reconstructing it eighteen months later from a folder of PDFs is a day's work in a week when you are also chasing the release, and it is the point at which most firms decide the sum is not worth the argument. That decision is exactly what the mechanism relies on.

1. One row per certificate, in date order, from your own numbered applications rather than from the payer's remittances.
2. Column one: what you applied for, cumulatively. Column two: what was certified, cumulatively. The gap between them is a valuation dispute and has nothing to do with retention.
3. Column three: the retention that should be held on that row — the contract rate applied to column two, capped at the contract limit. Compute it yourself; do not copy it across.
4. Column four: the retention actually deducted or released on that certificate, as the payment notice states it.
5. Column five: every other deduction on the same notice — contra-charge, set-off, discount, scheme deduction — named separately, because a deduction folded into the retention line is invisible to everyone including whoever made it.
6. Column six: what cleared the bank, and when. The gap between certified and banked is arithmetic rather than a discrepancy, and reconciling it belongs to the final-account guide next door.
7. Then check the one thing the sheet exists for: column three against the running total of column four. If they have parted company, the row where they parted is the conversation to have, while the people who were there still remember it.

Whose completion releases the first half

Half at completion is the convention rather than a rule, and both words in it need checking. The fraction may not be a half; more importantly, the completion is not necessarily yours. This is the single provision that decides whether a groundworker waits three months or two years, and it is the one most consistently skimmed at tender.

Where a sub-contract keys the first release to practical completion of the sub-contract works, the groundworker's first half falls due shortly after week nine, and the retention behaves the way everyone assumes it does. Where the sub-contract keys it instead to practical completion of the main works — which amended and bespoke sub-contracts frequently do, and which a busy estimator reads straight past because it is one word different — the first half is held for the entire main-contract programme, including every week of delay caused by trades that arrived long after you left. On a package completed early in a long job those two clauses are not variations on a theme. They are different commercial deals at the same price.

Sectional completion and partial possession complicate it in the direction of the payee, which is unusual and worth knowing. Where the main contract is divided into sections, or where the employer takes possession of part of the works early, the completion machinery can bite section by section rather than once at the end — so a package confined to a section that finishes early may have a release trigger available that the person operating the ledger has not thought about. It only helps if somebody asks, and the person with the incentive to ask is you.

The same question has a sharper answer on American federal work, where retainage is not automatic at all. FAR 52.232-5 permits a contracting officer to withhold on unsatisfactory progress rather than as a matter of course, and FAR 52.232-27 obliges a prime who does receive retainage to pass the subcontractor's share down inside the period the clause fixes. A subcontractor whose retainage is being held on a federal job out of habit rather than by a decision is being held against nothing.

The balance does not arrive because a period expired

The defects liability period, rectification period or defects notification period — three names for roughly the same animal, depending on which form you signed — runs for a stated length of time from a stated event. It expires on a date that can be worked out in advance. What almost nobody realises until the first time it happens is that its expiry pays nothing. Every standard form requires a document to come into existence afterwards, and the document does not write itself.

Find the document on your own form and write its name on the job file, because the four in common use behave differently enough to matter. On a JCT contract it is the certificate confirming the making good of defects, and a sub-contract release is generally geared to that event occurring above you. Under NEC4 with secondary Option X16 in play it is the Defects Certificate, issued at the later of the defects date and the end of the last defect correction period — a date derived by arithmetic from Completion of the works rather than from anyone's later opinion of them, which is the most useful property a release trigger can have. FIDIC's construction form keys the outstanding balance at Sub-Clause 14.9 to the latest expiry of the Defects Notification Periods, but it is still the Engineer's certification of that sum that moves it; the Performance Certificate at Sub-Clause 11.9 arrives separately and closes the contract rather than the money. AIA A201 moves the last of the retainage with final payment at Section 9.10, which turns on a list of deliverables being complete rather than on a date at all.

Every one is somebody else's signature, and the person holding the pen has no commercial reason to reach for it. So the useful act is not a reminder to yourself; it is a letter to them, about a month before the period expires, naming the provision, naming the date, and asking who will be issuing the document. Make it a question rather than a demand — a question gets answered by an administrator, whereas a demand gets forwarded to somebody senior and then sits. Either answer converts an obligation nobody was tracking into correspondence that exists.

Do the making good early, because it is the half of this you control. A defect notified on the last day of the period is still notified inside it, and correcting it can carry the release months beyond the date you had written down. So walk your own works before the period runs out rather than waiting to be called back: snag the package yourself, fix what you find at your own convenience with your own gang, and send a written record of having done it. A day's work, against a balance that has been in somebody else's account for a year.

One consequence of the release being a payment rather than a correction: everything that attaches to a payment attaches to it on the day it is made rather than on the day the work was done. Inside the Construction Industry Scheme the deduction comes off the released retention at the rate your registration attracts at that moment, which need not be the rate that applied when the trench was dug — HMRC's CIS340 governs it and the mechanics belong to this site's guide on running those deductions. The VAT tax point on retention follows the release in the same way, which the final-account guide handles.

An unsecured debt with your name on it

Retention held is not money in an account belonging to you. Under the JCT Standard Building Contract the employer's interest in retention is expressed as fiduciary, as trustee for the contractor, and — where the employer is not a local authority — the contractor has a right to require it to be placed in a separate identifiable bank account. That protection exists at the top of the chain. It very rarely exists at the bottom: retention held by a main contractor from a subcontractor, under most sub-contract forms in ordinary use, is not held on trust and is not segregated. It is working capital in the payer's business that happens to be labelled with your name.

The consequence appears only once, and by then it is settled. If the payer enters an insolvency process, retention held from you ranks as an unsecured claim alongside every other unsecured creditor, and it is distributed accordingly. No amount of correctness about the arithmetic changes that ranking. This is why the trust question in the table above is worth an email at tender stage on a package of any size, and why a bond — which is a claim against a surety rather than against the payer — changes the risk in kind rather than in degree.

It is also why the mechanism has been under review for years without a British statute emerging. The Department for Business, Energy and Industrial Strategy commissioned and published research on retentions in the construction industry in 2017, and a private member's bill proposing a statutory deposit scheme was introduced and did not become law. What did change is disclosure rather than protection: the Reporting on Payment Practices and Performance Regulations 2017 require large UK companies to publish their payment performance on a public register twice a year, and a 2025 amendment extended that reporting to retention held under construction contracts. That register is free, it is searchable by company, and reading a prospective payer's entry before you tender is the cheapest piece of credit control available to a small firm.

Alongside it, do the checks people run before a large order and skip before a large retention exposure: the filed accounts, the age of the last set, and whether the entity on the sub-contract is the one whose reputation you are relying on. Retention converts a payment risk into a credit risk with a two-year horizon, and a credit risk deserves a credit decision.

The leverage runs out at the moment the money falls due

On a commercial sub-contract in England and Wales the payment machinery of Part II of the Housing Grants, Construction and Regeneration Act 1996, as rewritten by Part 8 of the Local Democracy, Economic Development and Construction Act 2009, applies in full, and a release of retention is a payment inside it. So the notice regime is available: an application, a payment notice from the payer or the payee's own notice in default under section 110B where none arrives, and a sum that becomes the notified sum under section 111 unless a pay less notice is served in time. Applying for the release inside the ordinary payment cycle, in writing, with the arithmetic shown, is a materially stronger position than an email asking when it is coming, and it is the same afternoon's work. Section 113 kills pay-when-paid except on the insolvency of a party further up the chain, and section 110 as amended restricts making a due date depend on decisions taken under a different contract; whether a given release clause is caught turns on its wording, but the wording is not effective merely because it is printed.

What is not available is the thing that usually makes payers move. Section 112 gives a right to suspend performance for non-payment, and by the time the balance falls due there is no performance left to suspend — the works finished a year and a half ago. That is the structural fact about retention and it explains how the balance behaves: it is the only sum in the contract that becomes payable at the exact moment the payee has no operational leverage at all. What remains is section 108, the right to refer a dispute to adjudication at any time, which does not expire with the works and is deliberately quick; for sums too small to justify a full referral, the Construction Industry Council publishes a Low Value Disputes Model Adjudication Procedure with costs capped by reference to the amount in dispute. On a domestic job none of this machinery applies at all — section 106 lifts it off a contract with a residential occupier, as the stage-payments guide next door sets out.

And there is an outer clock. A retention balance is a contract debt governed by the Limitation Act 1980: six years from the cause of action under section 5 on a simple contract, twelve under section 8 where the contract was executed as a deed. Six years sounds generous against a two-year defects period until you remember that the trigger is a certificate nobody has issued, that the ledger is in a folder, and that the firm which dug the trench may have been sold or restructured meanwhile. The sum does not get easier to recover with age. It gets harder, quietly — which is the same mechanism that took it in the first place.