The defects liability period runs from practical completion for a stated length, commonly twelve months. During it the contractor is required to return and make good defects that appear, and the client holds part of the retention as security that they will.
The mechanism is simple and it works, provided somebody is paying attention at three specific moments: practical completion, the end of the period, and the issue of the certificate that releases the balance.
What retention is actually for
Retention is a percentage withheld from each payment, typically released in two halves: one at practical completion, the other after defects have been made good. It is security, not a fund, and it is not a discount.
Its practical value is leverage. A contractor with money outstanding returns to site. A contractor paid in full does not, or does so slowly and reluctantly, and the client's only remaining route is a claim.
That is why the second half matters disproportionately relative to its size. It is small money doing a large job, and releasing it early gives away the only lever the client has left.
Practical completion is a commercial event
Certifying practical completion releases half the retention, starts the defects period, ends liability for liquidated damages, and usually transfers insurance and possession. It is the single most consequential certificate on the job.
It is also frequently issued under pressure, with a long list of outstanding items described as minor. Whether the works are practically complete is a matter of judgement, but the judgement should be made on the works rather than on the calendar.
Where completion is certified with substantial items outstanding, the client has released money and given up the damages mechanism while still holding the risk. Wherever it is unreasonably withheld, the client is exposed the other way. Both errors are expensive and both are common.
The schedule of defects
Defects should be recorded as they appear, in a schedule with dates, locations and descriptions, and issued to the contractor promptly rather than accumulated for a single list at the end.
Prompt notification matters because it establishes the defect arose within the period, and because it gives the contractor a fair opportunity to return. A list of two hundred items delivered in the last week of the period invites an argument about every one of them.
Distinguishing defects from damage, from wear, and from items the client has changed is part of the exercise. Not everything on a snagging list is a contractor liability, and a schedule that mixes them weakens the items that are.
When the contractor does not return
Where a contractor fails to make good, most contracts allow the client to have the work done by others and recover the cost. That right is usually conditional on notice, on a reasonable opportunity having been given, and on the cost being reasonable.
Doing it without following the mechanism converts a straightforward recovery into a disputed contra charge. Following it takes a letter and a period of waiting, and it makes the deduction unarguable.
The evidence needed is the same as for any deduction: the defect, the notice, the failure, the quotation, the invoice. Assembled at the time it is routine. Equally, assembled afterwards it is a claim.
The certificate everybody forgets
The second half of retention is released against a certificate confirming defects have been made good. Where nobody issues it, the money sits, the contractor eventually asks, and it is released without anybody having checked whether the defects were actually resolved.
That is the most common failure in this whole area, and it is administrative rather than commercial. Diarising the end of the defects period at the point practical completion is certified takes a minute and prevents it.
Where the scheme is funded, the lender has the same interest and usually holds the same date. The related monitoring position is set out under what we do for the lender side.
Latent defects sit outside all of this
The defects liability period is a mechanism for making good, not a limitation on liability. Defects appearing after it may still be actionable under the contract, under collateral warranties, or otherwise, depending on the drafting and the limitation position.
Clients sometimes assume the end of the period ends the contractor's responsibility. It does not, and the distinction matters when something significant emerges later. Whether a particular route remains open is a legal question rather than a commercial one.
What can be said commercially is that the value of warranties and of the parties standing behind them is worth checking while there is still leverage, which is before the final release. The wider pattern is described in hidden cost exposure.
What this means for you
Diarise the end of the defects period on the day practical completion is certified, and start the inspection early enough to notify defects inside it.
Do not release the final half without a certificate and without having checked. It is the smallest sum in the account and the last one you control. Our approach sits under final accounts and disputes.
Approaching the end of a defects period?
Send the contract and the defects schedule. We will tell you what should be released, what should be held, and on what basis.