Retentions in construction: how they work and your rights

Understanding retention in construction

In UK construction, a retention is a sum held back from a subcontractor's payment, typically between 3-5%, until the end of a specified period. This practice ensures funds are available to rectify any defects during the defects liability period.

The typical retention cycle

The retention cycle starts at practical completion when most work is deemed finished. A portion of payments is withheld until the defects liability period, which usually lasts between 6 to 12 months, ends. Following this period, the retention is either released or used to fix any unresolved defects.

Why retentions are used

Main contractors use retentions to protect themselves against defective work. It acts as an insurance to ensure defects identified during the liability period are addressed.

Problems with retentions

Retentions can pose several issues; contractors may become insolvent, or unfairly withhold retentions for long periods. This can adversely affect subcontractors' cash flow.

Your rights under the HGCRA 1996

The HGCRA 1996 grants you the right to be paid according to the agreed schedule, and if payment is not made, the right to suspend work and refer disputes to adjudication.

The Construction Act

The Construction Act mandates that payment notices are issued 28 days from the due date. If payment is not made, a pay less notice can explain any reductions. Familiarise yourself with these provisions to safeguard your rights.

Retention reform

Despite many discussions, mandatory retention deposit schemes have not become law as of 2026. The government continues to seek solutions that protect subcontractors without dictating terms to manage retentions.

Actions when your retention isn't released

If a main contractor fails to release your retention, send a formal demand. You may also charge interest under the Late Payment Act and escalate the issue through adjudication.

Reducing retention risks

• Ensure written contracts outline retention terms.
• Agree to a defects list with set deadlines.
• Respond promptly to snagging issues.

Retention tracking checklist

1. Record all retention amounts in your contracts.
2. Keep track of each retention's due date.
3. Follow up as due dates approach.

Learn more about calculating late payments with our Late Payment Calculator and read our advice on handling non-paying clients in our guide.

Read more on retentions on gov.uk and Build UK.

FAQ

• What is a retention in construction?

  It's a percentage of the payment held back by the main contractor to ensure any defects are addressed during a set period.

• How long is the defects liability period?

  It typically ranges from 6 to 12 months.

• Can subcontractors refuse to work if not paid?

  Yes, under the HGCRA, subcontractors can suspend work if payments are not made as agreed.

• Are retention deposit schemes mandatory?

  No, as of 2026, they are not mandated by law, but discussions continue.