How are construction contract retentions intended to work?

Ideally, the subcontractor will receive half of the retention monies once the work is completed. This is sometimes called ‘practical completion.’

Subsequent to payment of the first moiety, the subcontractor enters the defect liability period. The subcontractor must repair or address any faults or defects in their work which the contractor has found following their inspection.

Once the defect liability period ends, the work is re-inspected. Providing that the contractor is satisfied that all the issues listed in the Schedule of Inspection are resolved, the certificate of making good of defects is issued and the second moiety of the retention is paid out. Otherwise, the process will repeat itself and payment of the last half of the money will not occur until the contractor is satisfied with the work.