What is a construction contract retention?

A construction contract retention is a percentage of the money payable to the contractor that is held back to ensure the work is completed in line with the agreed terms.

Typically, retention in a construction contract is set at between three to five per cent of the overall project value. The contractor will still receive instalment or stage payments, but the percentage is deducted from the interim payments. If the contractor has subcontractors working for them, this deduction is usually passed down the line.

The retention is usually  paid at two points during the project. Half of the retention is paid to the contractor when the work is completed. The second and final portion is paid when the liability period for defects ends.