How it works
- Agree it in the contract. State the retention percentage and the length of the defect liability period before work starts.
- Hold it from each payment. Deduct the retention from each running payment, or hold it from the final bill, as the contract says.
- Track defects after handover. Log every defect the client reports and assign it to the vendor responsible.
- Release when it is clean. When the period ends with no open snags and a settled bill, release the retention, approved by someone other than the person who raised it.
Common mistakes
- Releasing retention early to keep a vendor happy, then having no leverage when defects appear.
- No written defect liability period, so nobody knows when it ends.
- Snags tracked on a sheet nobody updates, so retention is released with defects still open.
Questions people ask
How long is a defect liability period?
It is whatever the contract says. For interior work many firms use somewhere between 3 and 12 months. Agree it in writing.
Is retention the same as a security deposit?
They serve a similar purpose. Retention is deducted from payments for work done; a security deposit is usually paid or held separately at the start. Your contract should say which you use.
Can retention be released in parts?
Yes, some contracts release half at handover and half at the end of the defect liability period.