Retentions and the defects period: money still owed

Retention is withheld from every progress payment, a small percentage at a time, and it accumulates quietly into a figure nobody has in front of them.

It is your money, held by somebody else, and a surprising amount of it is never collected because the date it became payable passed without anybody noticing.

Know the number, per contract

The first problem is visibility. Retention is deducted line by line across a year of claims, so the total exists only if somebody is adding it up.

Hold it as its own figure against each contract: retained to date, released so far, and outstanding. Where you are on both sides, holding retention from subcontractors and having it held from you, keep them apart. Netting them off produces a number that means nothing to either conversation.

Two releases, two dates, two different conversations

Most contracts release retention in two parts, and treating it as one event is how the first half gets forgotten.

1. At practical completion, usually half. This one is close to automatic, and it is the one most often left unclaimed because everybody is busy finishing.
2. At the end of the defects period, the remainder, once the defects raised have been made good.

The second release is the one people plan for. The first is the one that quietly stays where it is.

Diarise the dates when the contract is signed

The defects period runs from a date set by the contract, usually twelve months from practical completion, and twelve months is long enough for the person who knew about it to have moved on.

Put both release dates in as tasks with an owner the day the contract is executed, not the day the job finishes. A reminder that arrives a month before each release gives you time to raise the claim rather than to discover you should have.

Run the defects list as a live register

The remaining retention is released against defects being made good, which makes the defects list the document that controls your money.

Keep it as a register with the item, the date raised, who is responsible, the date rectified and the evidence. A list of defects with no dates against them is an argument waiting to happen, and the party without dates loses it.

Ask on the day, in writing

Retention is rarely refused. It is simply not paid until it is asked for, and an informal request at a site meeting is not asking.

Send a written claim on the date it becomes due, with the contract clause, the amount, and the defects list showing everything closed. That document answers every question the other side would otherwise use to delay.

A bank guarantee keeps the cash in your account

Many contracts let a contractor lodge a bank guarantee instead of cash retention. Where you are the one being held, that keeps your working capital where it is useful and costs a facility fee rather than the full amount.

Where you are holding it, a guarantee is security you have to call on rather than money already in your hands, which is a real difference on the day there is a dispute. Decide which you want before the contract is signed, because afterwards it is the other side's choice.

Treat it as an asset, not as a windfall

Retention sitting unclaimed does not appear in the cashflow, which is why its release feels like a bonus. It is not a bonus, it is money you earned and lent to somebody interest free.

Put outstanding retention on the same screen as unpaid invoices, so it is read weekly by whoever reads those. Money you are owed should not be filed somewhere different because of what it is called.

What to do first

• Hold retained, released and outstanding against each contract separately
• Keep retention you hold apart from retention held from you
• Diarise both release dates when the contract is signed
• Run the defects list with dates raised and dates rectified
• Claim in writing on the day, with the clause and the closed defects list
• Show outstanding retention beside unpaid invoices, weekly