Most building contracts reduce the retention percentage at practical completion, commonly by half, on the basis that the security required during construction is greater than that required during the defects period. That reduction is routinely missed, and finding out whether it happened is an early check in a retention recovery assessment.
The percentage and the reduction are both in the contract particulars, which is why reading them at the start of a project is worth the few minutes.
What the reduction is for
During construction the retention secures performance of the whole works. After completion it secures only the making good of defects, which is a smaller risk.
The contract reflects that by reducing the percentage held, usually at practical completion.
That logic also explains why holding the full amount after completion is difficult to justify where the contract provides otherwise.
Why it gets missed
Practical completion is the busiest moment on a project, with handover, snagging, occupation and final valuations all happening at once.
The valuation that should apply the reduction is frequently prepared in that period by somebody working at pace.
And because the sum involved appears as a smaller deduction rather than as a payment, nobody notices its absence immediately.
Establishing whether it happened
Compare the retention deducted in the certificate immediately before practical completion with the one immediately after.
Where the percentage did not change, the reduction has not been applied and the difference is due.
That check takes minutes and it is worth doing on every project at the point of completion rather than years later.
Sections and partial possession
Where the works complete in sections, the reduction applies section by section, in proportion to the value of each.
Where the employer takes possession of part, most contracts provide for a proportionate release in respect of that part.
Both of those are commonly overlooked, and together they frequently account for a significant sum on a phased project.
Where completion is disputed
If practical completion has not been certified, the reduction has no trigger, which makes the completion question a retention question too.
Where the employer has taken occupation without certifying, that is a position worth raising, because occupation is evidence even where it is not determinative.
Resolving the completion question is usually the quicker route to the money than arguing about the retention itself.
Claiming it afterwards
A reduction that should have been applied is simply an underpayment, and it is recoverable in the same way as any other.
Where several cycles have passed, the correction belongs in the next valuation or in the account, with the basis stated.
It is usually uncontroversial once pointed out, because it is a matter of arithmetic against the contract particulars rather than a matter of judgement.
From the employer side
Applying the reduction correctly protects the employer as much as the contractor, because an incorrect deduction is an exposure sitting on the account.
It is also a straightforward thing to get right, which makes getting it wrong difficult to defend.
Where there are genuine concerns at completion, the contract provides other routes that do not involve retaining money the contract says should be released.
What the particulars actually say
The percentage during construction, the percentage after practical completion, and whether any different figure applies to particular sections.
Some contracts also cap the retention at a stated sum, which changes the arithmetic once the works reach a certain value.
All of that is in one or two lines and determines the whole position.
Keeping track through the project
A simple running record of retention deducted and released, maintained alongside the valuations, makes the position visible at any point.
Without it the balance has to be reconstructed from the certificates, which is slow and frequently produces surprises.
Maintaining it is ordinary commercial management rather than anything to do with disputes.
The valuation that should have shown it
The reduction appears in the first valuation after practical completion, as a change in the retention line rather than as a payment.
That makes it easy to miss on both sides, because nothing in the document announces it and the total moves for several reasons at once.
Checking the retention line specifically, in that one valuation, is the whole of the exercise, and it takes a couple of minutes.
Where completion was certified late
Where the certificate was issued weeks after the works were actually complete, the reduction follows the certificate rather than the state of the works.
That delay is worth raising at the time, because it is easier to correct a certificate date then than to argue about it later.
Where completion is genuinely disputed, that argument belongs with the completion question rather than with the retention, and the two should be kept separate. The wider account, where it is also in issue, is a matter for final account dispute review.
Checking it on a live project
The moment to check is the valuation immediately after practical completion, while both parties still have the project in front of them.
Raised then, it is corrected in the next certificate without comment. Raised two years later it arrives alongside everything else in dispute.
That timing difference is worth more than the sum involved on most projects.
Where it fits
The reduction at completion is the easiest part of a retention position to establish and the most commonly missed, which makes it a good place to start.
Where it was not applied, the sum is usually recoverable without controversy.
Where it was applied correctly and the balance is still outstanding, the question moves on to the defects sequence and the certificate that follows it.
Retention that has not come back?
A retention recovery assessment establishes the balance from the certificates, fixes the release dates from the contract and sets out what has to happen before the money falls due.