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What is retention in a building contract?

Retention is a percentage of each payment, commonly around 5 per cent, held back by the employer. Half is typically released at practical completion and the balance at the end of the defects liability period once snags are remedied.

Retention protects against defects appearing after the builder has left site. Without it, the only remedy for a defect is goodwill or litigation, both of which are slow.

The percentage and release timing must be written into the contract. A defects liability period of six to twelve months from practical completion is common on housing work.

How it is usually structured

  • Deduct an agreed percentage from each interim payment
  • Release half at practical completion
  • Hold the remainder through the defects period
  • Release the balance on the certificate of making good defects

Sources

Last reviewed 28 August 2026. General information only — not legal or planning advice.

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