Retention
A percentage (typically 3-5%) of the contract sum withheld by the employer as security against defects. Half is released at practical completion; the remainder after the defects liability period.
Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.
Retention is a long-standing feature of standard-form UK building contracts under which the employer (or, in a subcontract, the main contractor) withholds a percentage of each interim payment as security against the contractor's failure to complete the works properly or to remedy defects. Its operation, and its potential to tie up contractors' and subcontractors' cash for long periods, has been the subject of sustained government scrutiny: BEIS ran a formal consultation on 'the practice of cash retention under construction contracts', run in parallel with a post-implementation review of the 2011 changes to Part 2 of the Housing Grants, Construction and Regeneration Act 1996, precisely because of concerns about how retention money is held and released.
The mechanics of retention were illustrated in William Verry Ltd v North West London Communal Mikvah [2004] EWHC 1300 (TCC), a Technology and Construction Court decision arising from adjudication under a JCT-based contract. The court recorded that a payment certificate had been reached 'by deducting the full amount of retention, being 5 per cent of the gross revised contract sum', and noted that this 5% figure 'was the maximum permitted retention allowed prior to practical completion' under that particular contract — with the retention percentage reducing to 2½% once practical completion had been certified.
The same case shows how the release mechanism typically works in practice: 'The contract provided that the first half of the sum retained as retention should be paid to the contractor following the issue of an interim certificate issued within a month of practical completion', with the remaining retention held back until expiry of the defects liability period, so that the employer retains leverage to require outstanding defects to be made good before the final tranche is released. Disputes over exactly how much retention should be released, and against what value of the works, are a recurring source of construction adjudications, as Verry illustrates.
Example
On a £2 million building contract with a 5% retention, the employer withholds £100,000 across interim certificates; £50,000 is released once practical completion is certified, and the remaining £50,000 is released only after the defects liability period ends and any snagging items have been made good.
Related terms
Official sources
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