What is retention, and how do you actually get it released?

As a percentage of the gross valuation on each payment application, deducted before the previously paid amount is taken off. On a £100,000 valuation with 5% retention, £5,000 is held and £95,000 is certified — less whatever you have already been paid.

Most contracts also cap the total retention held, often at 3% of the contract sum, so that it stops accruing once the cap is reached. And most halve the percentage at practical completion, which is why the first release is usually half of what is held.

Retention is a deduction from payment, not a reduction of the contract sum. It stays your money.

Because by the time it falls due, everyone who cared about the job has moved on. The site team is elsewhere, the quantity surveyor has a new project, and the sum is small enough relative to the contract that nobody upstream is chasing it. Retention is not usually withheld maliciously. It is forgotten.

The recurring causes, in roughly the order they cost money:

• Nobody recorded the practical completion date, so nobody knows when the release fell due.
• The rectification period end date was never diarised.
• The retention was netted off inside a valuation and never appeared as a line anyone could see.
• The main contractor is holding it against your client’s retention and cannot release until it is released to them.
• There is a defects list nobody closed out, so the second release never becomes payable.
• The paying company went insolvent, and retention held in its general account is an unsecured debt.

NoteThat last one is the real risk. Unless the contract requires retention to be held in a separate trust account, you are an unsecured creditor for it. Ask for a trust account at contract stage; nobody grants one after the event.

1. 01Record the two dates on day one. Practical completion and the end of the rectification period. If PC has not happened yet, record the target date and update it.
2. 02Get practical completion certified in writing. A certificate, or at minimum an email from the contract administrator confirming the date. Verbal PC is not a date you can enforce against.
3. 03Close the defects list. Photograph each item as it is completed and send the evidence at the time, not in a bundle at the end. An open snag is the standard reason for withholding the second half.
4. 04Apply for it formally. Retention release is a payment like any other. Make it an application or an invoice under the contract mechanism, with the sum and the basis stated, so the payer has to serve a pay less notice to withhold it.
5. 05Diarise the chase. Seven days after the final date for payment, then escalate to the commercial contact rather than the site contact.
6. 06Use the leverage the Act gives you. A retention release application that goes unanswered becomes a notified sum, and an unpaid notified sum can go to adjudication — which is quick, and available at any time.

Retention released informally is retention that can be forgotten. Apply for it under the contract so the notice clock starts.

The Reporting on Payment Practices and Performance (Amendment) Regulations 2025 came into force on 1 March 2025 and apply to financial years beginning on or after 1 April 2025. They extend the existing large-company payment reporting duty to retention held under construction contracts.

Qualifying companies and LLPs now have to publish, twice a year:

• Whether their construction contracts include retention clauses
• The standard retention percentage they apply
• The contract value threshold below which they do not take retention
• The procedure they follow for releasing retention

This does not force anyone to release your retention. What it does is put the policy on a public register, which is genuinely useful at tender stage: you can look up a main contractor’s stated retention practice before you price their work, and you can quote it back to them when the release is late.

NoteThe duty falls on large businesses only — broadly those exceeding two of the three thresholds for turnover, balance sheet total and employees. Most subcontractors are reading these reports, not filing them.

On public and large private work, refusing is usually not an option. On smaller commercial work it often is, and the alternatives are worth asking for: a retention bond, a parent company guarantee, or simply a lower rate. Retention on a £20,000 subcontract is security worth £600 to the payer and administration worth more than that to both of you.

If you do accept it, price it. Retention held for eighteen months is a real financing cost, and a firm carrying £40,000 of retention year-round is funding it out of overdraft. That belongs in your overhead recovery, not in your margin by accident.

Retention is deducted on the payment application and tracked to release, with retention releases raised as invoices carrying the same VAT treatment as any other invoice — reverse charge included. Payment Applications is a £19-a-month module, included from the Pro plan at £249 a month.

Being straight about the limits: Estimark does not chase retention for you, does not send a reminder when a rectification period is about to end, and does not hold retention in trust. It keeps the figure visible and attached to the job so the release is a task rather than an archaeology exercise. See payment applications and retention.