Glossary

Retention

What retention means in a building contract, why it's withheld, and when it's released back to the builder.

Retention is a percentage of each progress claim withheld by the developer, typically five to ten per cent, held back through construction and released once practical completion is reached or a defects liability period expires without material issues. It exists to give the developer, and by extension the financier, leverage to have defects rectified rather than chasing a builder who has already been paid in full for work that later proves faulty or incomplete. On a financed project, retention is usually managed within the construction facility's drawdown structure, so the amount released at each stage already reflects the retained portion rather than the full progress claim. Builders factor retention into their own cash flow planning across a project, and disputes over whether retained funds should be released on schedule are a recurring point of tension near a project's completion.

Related

Construction finance · Progress claim · QS report

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