Retention Money & Final Payment
The Construction Industry’s Version of “We’ll See…” Aka: “You did the job, but let’s keep 5%… just in case you didn’t.”
What Is Retention Money?
Think of retention like a security deposit on your apartment — except you built the apartment, and your landlord is now ghosting your calls.
In construction contracts, retention money is a percentage (usually 5–10%) of the contract amount that the employer withholds from each interim payment.
Why?
Because employers don’t trust anyone. Not even their own BOQ.
It’s meant to:
Protect against defects in the works.
Ensure the contractor doesn’t vanish after commissioning.
Cover rectification costs if things go wrong after handover.
When Do You Get It Back?
In two stages — just to keep the suspense alive.
Stage 1: Practical Completion / Taking Over
Usually, half the retention is released once the employer certifies that the works are substantially complete and can be taken over. It’s like saying, “You’re done. But not done-done.”
Stage 2: After the Defects Liability Period (DLP)
The second half is released only after the DLP ends — provided:
No defects have appeared,
You fixed the ones that did,
You didn’t ghost the site team,
And no one found out you used the wrong grade of concrete.
Final Payment = The Grand Finale (Or Not?)
Final Payment is the last chunk the contractor receives. It typically includes:
Balance of retention money
Any pending variations
Final measurement adjustments
And maybe a tearful farewell
BUT—this is where claims, back charges, LDs, and audit memos come out of hiding.
Don’t be surprised if the final bill looks like this:
Yes, welcome to construction.
Common Red Flags in Retention Clauses
Drafting Tips (That Save Sanity)
Define clear timelines for both practical and final release.
Specify what documents are needed (DLP expiry, clearance, etc.).
Negotiate interest on retention (or at least time-bound release).
Cap the types of deductions that can be made from final payment.
Insist on a dispute mechanism if release is delayed.
Retention is the industry’s polite way of saying:
“We’ll pay you — but only after we’re absolutely, completely, undeniably sure you didn’t mess up.”
Final Payment is where contractors either celebrate…
or contemplate arbitration.
So draft it right. Track it tight.
And remember: a withheld dollar is still a dollar owed — not a gift to the employer’s cash flow.