They're Holding My Retention: What Can I Actually Do?

‍‌​​​​‌​‌​​​‌‌​‌​‌​​‌​‌​‌​​​​‌‌​‍Retention is the slice they knock off every payment "for security". In the UK it's still standard, especially on private jobs, but the Act and upcoming reforms give you some levers to stop it being a black hole.

This is general guidance only and is not legal advice. Always check your own contract and get proper legal advice before you argue over retention or start a claim.

1. WHAT RETENTION ACTUALLY IS IN PRACTICE

In most UK construction contracts:

• A retention is a percentage of each payment (often 3–5%) held back as security in case you don't fix defects or walk off.
• It's usually released in two stages:
  • First half at practical completion of your works;
  • Second half at the end of the defects liability period (often 6–12 months after completion).

Typical pattern you'll see in JCT-type contracts and subcontracts:

• 5% retention during the works.
• 2.5% released at practical completion.
• 2.5% released at the end of the defects period / retention release date, assuming you've sorted any snags.

The Construction Act doesn't set a cap or standard %, but its payment rules still apply – they can't delay retention forever or tie it to someone else's contract in ways that dodge the Act.

2. WHAT'S "NORMAL" vs TAKING THE MICK

You'll see all sorts in the wild. Some contracts are fair, others are outright cash-grabby.

Normal-ish, industry-standard stuff:

• Retention in the 3–5% range on the contract value.
• Clear wording on:
  • When retention is deducted (each interim payment).
  • When the first half is released (practical completion of your works).
  • When the second half is released (after a defined defects period – e.g. 12 months).

Red flags and abusive patterns:

• Retention above 5% with no decent justification.
• Second half not released until some distant event in the main contract (e.g. "12 months after making good defects under the main contract", or linked to final completion of the whole project) – this is a classic way to drag payment years beyond your own defects period.
• Vague wording like "retention will be released when the employer is satisfied", with no dates.

You can't just rip these clauses up mid-job, but you should:

• Push back hard on retention % and timelines before you sign.
• Keep your own retention log so you don't forget to claim it when the dates hit.

3. HOW THE CONSTRUCTION ACT STILL HELPS YOU

The Act doesn't ban retention, but it does police how they pay it.

Key points:

• Retention is usually part of the "sum due" in your interim/final payments. The same rules on due dates, payment notices, pay less notices and final dates for payment apply to retention release.
• If the contract tries to make your retention release depend on payment or certificates under another contract ("we only pay your retention when the employer pays ours"), that can fall foul of the Act's ban on certain conditional payment arrangements.
• Once the retention release trigger happens (e.g. your practical completion certificate or defects period expiry), you can:
  • Apply for it as part of an interim/final application;
  • Use the payment notice/pay less notice regime;
  • Run an adjudication if they still don't release it.

In some public-sector and NI guidance, there's a clear expectation that retention is released promptly when due, and held fairly across the chain.

4. RETENTION REFORM AND DEPOSIT SCHEMES – WHAT'S COMING

There's a big push to stop retentions disappearing when a main contractor goes bust or just never paying them.

Current direction of travel:

UK government and industry have been consulting on retention reform and even banning cash retentions outright for some contracts.

Proposals in the mix include:

• Prohibiting retentions on smaller contracts (e.g. sub-£100k), where holding 5% does more harm than good.
• Requiring any retention that is held to be protected in some form of custodial / deposit scheme.

One live example:

The UK Retention Deposit Scheme (UKRDS) is already running as a voluntary custodial scheme. It holds retentions in a protected account, with project-specific details, and allows release on certification or adjudicator decision.

It's designed to:

• Stop retentions being used as working capital by big contractors.
• Make it easier to see what's held and when it should be released.
• Support the same "pay now, argue later" principle via adjudication.

Government is openly looking at using custodial schemes or outright bans as the way forward, but for now traditional retentions are still legal – you just need to protect yourself.

5. WHAT YOU SHOULD DO ON EACH JOB

Practical habits so retention doesn't quietly sink your cashflow:

Nail down the numbers and dates up front

Ask before you sign:

• What's the retention %?
• When is the first half released?
• When is the second half released?
• Is my release tied to anything in the main contract?

Push to:

• Cap retention at 3–5% tops.
• Get second-half release tied to your defects period, not the whole project.

Treat retention as a separate line item

• Put retention as its own line on every application and on your internal ledger.
• When you hit practical completion, do a specific application that clearly shows "retention first half release".
• Diarise the defects period expiry and hit them with an application for the second half as soon as it ticks over.

Don't treat retention as profit

• Assume you won't see it for at least 12–24 months from start, sometimes longer on bigger projects.
• Don't use it as working capital in your head – it's money you'll maybe get back, not money you have now.

Chasing retention – escalation path

As soon as the retention release date passes:

1. Send a clear application / invoice.
2. Quote the contract clause and the date it became due.

If they ignore you: 3. Use a firm reminder referencing the Construction Act payment regime. 4. Consider adjudication just on retention if the sum is big enough – it's often a clean, self-contained dispute.

Ask about protected schemes

• On new jobs, especially with bigger clients, ask if they're using a proper retention deposit scheme or trust/custodial arrangement.
• It's added security if they go under – and government is nudging the market this way anyway.

6. WHEN TO PUSH AND WHEN TO CUT YOUR LOSSES

Retention is often the last 2–5% of your money – annoying, but not always worth a war.

Push hard (letters, adjudication, maybe court) when:

• The retention balance is significant for you (say £10k+ or whatever would make a real dent).
• The release dates have clearly passed, you've done defect rectification, and they're just stalling.
• The main contractor is still trading and has paid other bits but is sitting on retentions as cheap finance.

Think twice if:

• You genuinely haven't fixed known defects and have been dodging calls – they may have a fair right to hold some or all of it.
• The contractor is on the brink or already in formal insolvency – at that point you're one of many unsecured creditors and you might get pennies, if anything.
• The retention is tiny and the time and fees to chase it would cost more than it's worth.

This page is guidance only and does not constitute legal advice. Using it does not make us your legal adviser. Always get advice from a qualified construction professional before you start formal action over retention.

What to do next

• Check your subcontract for the retention %, release triggers (practical completion and defects period end), and whether release is tied to the main contract.
• Set up a retention log for every live job · track what's held, when the first half is due, and when the second half is due.
• As soon as a release date passes, send a clear application quoting the contract clause and date.
• If they ignore you, send a firm reminder referencing the Construction Act payment regime and consider adjudication if the sum is big enough.
• On new jobs, ask whether the client uses a retention deposit scheme or trust arrangement for added security.

Sources

• Housing Grants, Construction and Regeneration Act 1996 · payment notice, pay less notice, and right to adjudicate apply to retention release
• Scheme for Construction Contracts (England and Wales) Regulations 1998 · fills in gaps on retention payment timing
• Local Democracy, Economic Development and Construction Act 2009 · amended payment rules including retention

This topic is sponsored by The Online Accountant.

www.theonlineaccountant.com/?utm_source=sitekiln&utm_medium=sponsor&utm_campaign=payment-section →

SiteKiln's editorial team writes every guide independently. Sponsors do not review, edit or sign off on content. See our editorial standards.

Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.

In crisis? Samaritans 116 123 · Mental health support