Q&As

Is there a maximum time limit for which retention under a building contract can be withheld?

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Published on LexisPSL on 29/10/2014

The following Construction Q&A provides comprehensive and up to date legal information covering:

  • Is there a maximum time limit for which retention under a building contract can be withheld?
  • Pre-contract
  • Release of retention is delayed

Is there a maximum time limit for which retention under a building contract can be withheld?

Retention is the money retained from interim payments, by the employer, as security for future performance: the purpose of retention is basically to ensure both that completion is reached and that there is good/proper workmanship. See Practice Note: Retention of payment in construction contracts.

Typically, market practice is that the retention money will be partially released by the employer (commonly 50%) on practical completion, with the remaining portion being released at the end of the defects liability period. This is the case under both the JCT and the NEC3 contracts.

There is no maximum time limit, under statute or at common law, for which a retention can be withheld by the employer. It will depend on the terms of the contract.

How long retention may be withheld may be an issue during pre-contract negotiations or, at the end of the project, when an employer may be delaying the repayment of the retention to the contractor.

Pre-contract

The arrangements regarding the repayment of retention that may be incorporated in a building contract will depend on

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