What Is Construction Retention?
Retention is a sum of money withheld from a contractor's payments during the course of a construction project. It acts as a financial security against defects and incomplete work. The client holds this money until the contractor has fulfilled their obligations, at which point the retention is released in agreed stages.
In the UK construction industry, retention is standard practice across most contract types, including JCT contracts, and is used on projects ranging from small residential extensions to large commercial developments. For homeowners managing renovation and extension projects, understanding retention helps you use the contract mechanism effectively to protect your interests.
How Much Is Retention and When Is It Held?
The standard retention rate is typically three to five percent of the contract value. On most residential projects under JCT Minor Works or Intermediate contracts, a retention of five percent is common during the construction phase. This reduces to half the original retention — two and a half percent — at practical completion, when the building control process confirms the project is substantially complete.
The remaining half of the retention is released at the end of the defects liability period, which is typically six months or twelve months after practical completion, once the contractor has remedied all defects identified during that period.
How the Retention Release Process Works
At practical completion, the contract administrator — typically the architect, project manager, or principal contractor's commercial lead — issues a practical completion certificate. At this point, half the retention becomes due for release. The contractor receives this payment, and the defects liability period begins.
During the defects liability period, the client notifies the contractor of any defects that arise. The contractor is required to remedy these at their own cost. At the end of the defects liability period, the contract administrator inspects the project, confirms all defects have been addressed, and issues a making good defects certificate. The final retention is then released.
If the contractor fails to return and remedy defects, the client can use the withheld retention to fund remedial works by a third party, subject to proper notice and contract procedures.
What Happens If a Contractor Goes Insolvent?
One well-documented problem with retention in the UK is that if a contractor becomes insolvent during the project or during the defects liability period, the client effectively loses the protection the retention was meant to provide — there is no one to come back and fix the defects. Equally, sub-contractors and specialists who are owed retention money by main contractors can lose significant sums if the main contractor fails.
The government has consulted on retention reform on several occasions, and retention deposit schemes have been proposed to ring-fence retention money. As of the time of writing, the issue remains under discussion, but no mandatory ring-fencing scheme has been implemented for the general UK construction industry.
Retention on Small Residential Projects
On smaller residential projects, formal retention is not always used, particularly where the contract is relatively simple and the relationship is direct between homeowner and sole contractor. In these cases, a final payment held until practical completion and defects sign-off serves a similar protective purpose.
Where a JCT Homeowner Contract or similar simple contract is used, retention clauses are usually included but the mechanism is streamlined. The principle — withhold something until defects are resolved — is the same whether the contract is formal or simple.
How RCB Handles Retention
At RCB Design and Build, our contracts include retention provisions appropriate to the project size and type. We agree the retention amount, retention release schedule, and defects liability period clearly in writing before construction begins. Our clients know exactly when each retention release is due, and we manage the defects process proactively so the final retention release is a formality rather than a dispute. Contact us to discuss how payment and retention works within our standard contract framework.