Retentions: how they work, how to get yours back, and the proposed ban

A retention is a percentage, such as 3% or 5%, that a client or main contractor holds back from each payment until conditions are met. Usually half comes back at practical completion and half after the defects period. Your contract sets the dates. Diary them, invoice or apply on time, and send a release letter the day each half falls due.

How does retention work on a construction job?

Each time you're paid, the payer keeps a percentage back. That money builds up over the job. It's meant to cover the cost of fixing defects if you don't come back to fix them yourself.

On thin margins, retention can be a large share of the profit on a job. A 5% retention on a job with a 10% margin means half your profit sits with the client for a year or more. That's why it shows up in so many busy but broke stories.

When is your retention due back?

When your contract says. Look for three things: the trigger for each release (practical completion, sectional completion, the end of the defects period, or the making-good certificate), the length of the defects period, and whether you need to apply or send a notice to get paid.

The catch for subcontractors is when the release is tied to the main contract: your second half comes back when the main contractor's defects period ends, which can be months after yours. A clause making your payment depend on the main contractor being paid by the client is ineffective under the Construction Act unless the client is insolvent, but a release date tied to another contract's certificate is a different question. Read it carefully, and get advice if it's a large sum.

These rules don't cover work for a homeowner on the home they live in. Most retentions arise on commercial and main contractor work, where the Act applies. Scotland and Northern Ireland have their own versions of the payment rules, so check which applies to your contract.

Is your retention overdue?

Run this check against your contract and your records.

How do you ask for retention to be released?

In writing, quoting the contract clause and the trigger, with the amount and a date. Keep it factual.

Your business name
Address
Date

To: Contractor's or client's legal name, accounts address
Contract: subcontract or contract reference, project name and site

Release of retention: first / second moiety

Under clause clause number of the contract, half / all of the retention becomes due on practical completion / expiry of the defects period / the certificate named. Practical completion was certified on / The defects period ended on date.

Retention held to date: £total retention
Amount now due for release: £amount + VAT if applicable

Please find attached our application / invoice number for this amount. Please confirm the payment date. If you consider a lower sum is due, the contract and the Housing Grants, Construction and Regeneration Act 1996 require a pay less notice setting out the sum and the basis for it.

If payment isn't received by final date for payment, we will consider our options, including statutory interest and adjudication.

Yours faithfully,
Name
Position

For a business payer, late payment interest is 8% above the Bank of England base rate unless the contract sets a different remedy. Late payment interest shows how to work it out.

What is the proposed ban on retentions?

The Commercial Payments Bill would make retention clauses in construction contracts void after a transition period. The government introduced it in the House of Lords on 19 May 2026. It completed its Lords stages and was brought to the Commons on 21 October 2026; the Commons second reading date had not been announced when we checked on 26 October 2026.

As the bill reads in the version brought from the Lords (Bill 166):

• A transition period of two years would run from the day the retention section comes into force.
• A retention clause agreed after the transition period would be void, and parties couldn't vary an existing clause to make it worse for the payee.
• Existing retention clauses would become ineffective after a "last retention day", the end of the three years starting when the section comes into force. Money still held then would become payable.
• If retention isn't paid when required after the transition period, the payee could claim a fixed sum of the higher of £40 or 50% of the retention debt, on top of statutory interest.

The government's overview says it will consult further on the timing for implementation. None of this is law yet, and the bill could change in the Commons. Until it passes and comes into force, your contract and the existing Construction Act rules decide when you get your retention back. The same bill would also cap most business payment terms at 60 days; see commercial payments bill for subcontractors for the rest of it.

How do you stop retention going missing?

Track it per job and diary each release. Retention that nobody chases can sit unpaid for years. A London electrical and fire alarm contractor we work with, with about ten live commercial jobs, wanted a tracker per job running through to final account for this reason: once a site is finished, nobody is looking at it.

Use a per-job invoice tracker to keep the running total, and put the release dates into your cash flow forecast.

Common questions