Last checked October 2026 · by the PaySorted team
How retentions work
The contractor keeps a percentage of each payment — typically 3% to 5% of the value. Usually half is released at practical completion and the other half at the end of the defects period, which is often 6 to 24 months. The exact percentage and dates are whatever your contract says.
Example: on a £40,000 subcontract with 5% retention, £2,000 is held back. £1,000 should come back at completion and £1,000 at the end of the defects period.
What the law says
Under the Construction Act, a contract can't make your payment depend on the contractor being paid by someone else ("pay when paid"), except where that party is insolvent. It also can't make your payment depend on what happens under a different contract — for example, "your retention is released when we get ours from the client". Courts have treated clauses like that as ineffective, and the fallback rules in the Scheme for Construction Contracts apply instead.
Retentions are still legal today. The government has announced a plan to ban them, and the Commercial Payments Bill is going through Parliament, but it isn't law yet and would come with a transition period of a few years.
How to get your retention back
- Diarise the dates when you sign: practical completion and the end of the defects period.
- Fix any defects you're told about promptly, and keep dated photos and sign-offs.
- Apply for it in writing when it's due — an application for payment or an invoice stating the amount.
- Watch for a payment notice. If the contractor doesn't send one, you can send your own notice. See payment notices and pay-less notices.
- No pay-less notice? They must pay. If they haven't served a valid pay-less notice in time, the amount notified is due in full.
- Chase it like any other overdue invoice. On business-to-business work you can add statutory late payment interest at 8% above base rate plus fixed compensation, unless the contract sets its own fair remedy.
- Escalate: a letter before action, then adjudication, or a small claim for up to £10,000.
Protect yourself before you sign
- Negotiate the percentage down, or a cap on the total held.
- Ask for a fixed release date for the second half, rather than one tied to the main contract.
- Price the risk in if you can't negotiate it out.
- Check the contractor's credit — retention is lost if they go bust.
In PaySorted you can raise the retention release as its own invoice with a due date, and automatic reminders chase it for you when the date comes round.
General information (checked October 2026), not legal advice. Retention rules depend on your contract; a construction solicitor or adjudicator can advise on your case.
Common questions
What is a typical retention in construction?
Usually 3% to 5% of each payment, with half released at practical completion and half at the end of the defects period.
Can a contractor hold my retention until they get theirs?
Generally no. The Construction Act makes clauses that tie your payment to another contract ineffective, and fallback rules then apply.
Are retentions being banned?
The government plans to ban them through the Commercial Payments Bill, but as of October 2026 it is not law, and a transition period is expected after it passes.
Can I charge interest on late retention?
On business-to-business contracts you can usually claim statutory late payment interest at 8% above the Bank of England base rate, unless your contract sets its own substantial remedy.