Main contractors hold retention from subcontractors and have retention held from them, and the two sets of obligations are frequently treated as a single chain. They are not. Each subcontract has its own release events, and they do not wait for the main contract. That distinction is central to a retention recovery assessment on a subcontract package.
The commercial instinct, that money cannot be released downwards until it is received from above, is understandable and does not reflect what most subcontracts say.
Separate mechanisms
The subcontract sets its own retention percentage, its own release events and its own periods, drafted to sit alongside the main contract rather than to depend on it.
Those events typically relate to completion of the subcontract works and to the subcontract defects period, not to practical completion of the project.
Where the subcontract does tie release to main contract events, that is a drafting choice worth identifying, because it changes the position entirely.
Where the pass through assumption breaks
A subcontractor finishing early waits years for retention because the project has not completed, even though its own release events occurred long ago.
A contractor holds subcontract retention because the employer holds its own, on the assumption that the two are linked.
Neither position usually reflects the subcontract, and both are worth testing against the document rather than against practice.
Conditional payment arrangements
Clauses making payment conditional on the contractor being paid are restricted in the United Kingdom, subject to limited exceptions, and whether a particular clause is effective is a legal question.
What is clear commercially is that the subcontract mechanism operates on its own terms and that informal assurances carry no weight.
A subcontractor told that retention will follow when the employer releases it should establish what the subcontract actually provides.
The early finishing trade
Groundworks, substructure and frame packages complete long before the project does, and their retention frequently sits for years.
Where the subcontract ties release to subcontract completion, that money has been due for a long time.
Establishing the position is quick and it frequently produces a balance nobody has looked at since the package finished.
Defects in a subcontract package
The subcontract defects period has its own length and its own start, and the making good obligation is defined by the subcontract rather than by the main contract.
Where the subcontractor has made good its own items, that part of the sequence is complete whatever remains outstanding elsewhere on the project.
Holding subcontract retention against defects in other packages is not a position any subcontract supports.
The contractor’s exposure
Holding retention downwards creates an obligation to release it on subcontract events, which may arrive long before the contractor recovers its own.
That timing gap is a working capital cost and it is rarely planned for.
It is also a reason contractors benefit from closing subcontract defects sequences promptly rather than leaving them open.
Keeping track across packages
A single schedule covering every package, with its retention percentage, release events, dates and balances.
On a project with twenty subcontracts that document is the only practical way to know the position, and it is rarely maintained.
Without it, releases happen when somebody asks rather than when they fall due, which is the origin of most of these disputes.
From the subcontractor side
Know your own release events before the package finishes, and diarise them.
Ask for the release when it falls due rather than when the project completes, and reference the subcontract rather than the main contract.
Where the contractor declines on the basis that the employer has not released, ask what provision of the subcontract that rests on.
From the contractor side
Releasing subcontract retention when it falls due is both the contractual position and good commercial practice, because subcontractors remember.
Where there are genuine defects, deal with them formally rather than holding the balance quietly.
And keep the two mechanisms separate in your own records, because conflating them is what produces unexpected liabilities at awkward moments.
Retention held twice over
A subcontractor working for a contractor who is itself a subcontractor sits two levels down, with retention held at each level.
Each of those balances follows its own contract, and the lowest one is frequently the last to be released and the most exposed.
Knowing where you sit in the chain, and what your own contract says, is the whole of the protection available.
What to agree at order stage
The retention percentage, the release events and whether they relate to the subcontract works or to the project, all stated plainly in the order.
Where a subcontractor is being asked to wait for main contract events, that is a commercial term with a cost and it should be priced rather than absorbed.
Agreeing it at order stage takes a sentence; arguing about it four years later takes considerably longer.
Where the main contract genuinely governs
Some subcontracts do tie release to main contract events, and where they do, that is the position however unattractive it looks.
In those cases the subcontractor’s interest lies in the main contract sequence progressing, which is worth asking about rather than waiting silently.
Information about the main contract position is frequently withheld simply because nobody has ever asked for it in writing.
Where it fits
A subcontract retention position is quick to establish and frequently produces money that nobody disputes once the sequence is set out.
Where it is part of a wider subcontract account in dispute, it is addressed alongside the rest through final account dispute review.
Administering both mechanisms properly through the project is commercial management work rather than claims work.
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.