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When must retention be released, and what if it's held back?

The short answer

When your contract says. No statute sets a retention release date, and the Construction Act's payment rules3 set no cap and no rule that the money is kept apart. Custom is half at completion and half after a defects period of 12 to 24 months1, but the contract decides. Once a release is due, the notice rules and late-payment interest7 usually apply to it.

Mara, WolfX research desk
Written with AI, checked by a person · 8 October 2026

England and Wales only. WolfX is software, not a law firm.

The numbers

The numbers behind retention.

3–5%Of the contract value, typically held back during the job. Custom, not law.1

1–2 yearsA typical defects period before the second half is released (12 to 24 months).1

11.75%Yearly interest on a release that goes late in the second half of 2026.9 10

28 daysFor an adjudicator to decide once a dispute is referred, unless more is agreed.5

What you can add

A £3,200 retention, half of it 37 days late

Say you are a roofing subcontractor on a £64,000 job. The contract holds back 5%, so £3,200 is retained across the payments. Half is released at practical completion, the day the work is signed off as finished: 15 July 2026. The contract sets the final date for payment 14 days later, on 29 July. On 4 September the first £1,600 is still unpaid: 37 days late, and no pay less notice has come. The sums leave out VAT. Interest is 8% over the Bank of England base rate9: 11.75% a year10 for debts that went late between 1 July and 31 December 2026.

£1,600.00The first half of the retention

£19.06Interest: £1,600 × 11.75% ÷ 365 × 37 days9

£70.00Fixed sum (debts of £1,000 to £9,999.99)11

£1,689.06Owed on 4 September 2026

Then it grows by £0.52 a day until they pay. The second £1,600 is released on 15 July 2027 if your defects period is 12 months, and is payable 14 days later. That is £3,200 of your money held back across the job, and half of it for a year more. The Commercial Payments Bill, before Parliament, would ban deducting and withholding retention2. The government says the timing is still to be consulted on and it will not apply retrospectively. It is not law.

The road ahead

Seven steps. All free but the last.

Step 1: Find your release terms in the contract
No statute sets them. Find the percentage held, what triggers each release (a completion certificate, the end of the defects period, a certificate that defects are made good), any notice you must give, whether the money is to be kept apart, and the final date for payment, which every construction contract must provide for4.
Cost: FreeTime: 20 minutes
Step 2: Test any clause that waits on someone else
A release that waits until the payer is paid is ineffective3 (section 113), unless whoever owes the payer, or anyone further up the chain, is insolvent.
One that waits on another contract being performed, or on a decision that it has been (a main-contract certificate, say), can fall under section 110(1A)4: the requirement for an adequate payment mechanism "is not satisfied", and the Scheme for Construction Contracts fills the gap. Section 110(1C) covers only a contract to have someone else do the work.
Before you rely on this against a clause, a solicitor who does construction disputes can read it.
Cost: FreeTime: 10 minutes
Step 3: Close your defects, in writing
Holding retention against defects is what it is for1. Walk the snagging list, make good what is left, and send a dated email saying each item is done. A closed list takes away the payer's usual reason to wait.
Cost: FreeTime: A site visit
Step 4: Apply when the contract says; invoice on the release date
Send any application the contract asks for by its date, even if that is before the release. If you charge VAT, send the VAT invoice on the release date, not before: the VAT on retention is due when you invoice or are paid12, whichever comes first.
Cost: FreeTime: 15 minutes
Step 5: Check what notice they sent
Their payment notice is due five days after the release falls due3. If it names the sum and no valid pay less notice follows in time, the notified sum must be paid in full3 by the final date.
If none came, send your own at once: each day you wait puts the final date back a day. The steps are on the pay less notice page.
Cost: FreeTime: 15 minutes
Step 6: Ask in writing the day after the final date
Send the email below. Ask early: nothing requires the payer to keep retention apart1, so each month it sits is a month you rely on the payer staying solvent.
Expect a date, a payment, or a list of open defects. Interest starts on the day after the agreed payment day7 and the fixed sum11 comes with it, unless your contract has its own real late-payment remedy8.
Cost: FreeTime: 14 days
Step 7: Still unpaid? Refer it to adjudication
A retention dispute is a dispute under the contract, so you can refer it to an adjudicator5, who has 28 days from the referral to decide unless more is agreed. It needs no court claim. The steps are on the adjudication page.
Cost: An adjudicator's feeTime: About 5 weeks

A letter you can copy

Email asking for your retention to be released

Send it the day after the final date for payment has passed with the release unpaid, with your invoice for the release attached.

New email

SubjectRetention on : release due

Dear , Under clause of the contract for , the half of my retention, , was due to be paid by , following . It has not been paid. All the defects notified to me have been made good. My invoice for this release is attached. I have had no payment notice and no pay less notice for it. Interest under the Late Payment of Commercial Debts (Interest) Act 1998 has run since . With the fixed sum for late payment, that adds , so the total due today is . Please pay the full amount by to: If it is not paid by then, I will refer the claim to adjudication. If you believe any of this is wrong, please tell me before that date and say why. If you say a defect is still open, please tell me which one and where. Kind regards,

Tap a highlighted gap to see what goes in it.

Send it by email so it is dated, and keep a copy with the contract and the completion certificate. Send it only if the line about defects is true. If one is open, make it good first and tell them in writing. If no payment notice came in time, send your own first, as the pay less notice page shows. If one came, cut the notice line. If your contract sets its own late-payment charge, check it before you quote the 1998 Act: a real contractual remedy can replace statutory interest.

When not to bother

When it isn't worth it

The release date has not come. The payer is entitled to hold the money until the final date for payment. Put that date in your diary and ask the day after.
A defect is still open. Holding retention against defects is what it is for. Make it good and say so in writing before you ask. If you dispute that it is a defect, a solicitor who does construction disputes can read the contract first.
It is small and you want the work again. Ring first and ask for a date. Send the email if the date passes. A few days' interest is pennies.
The payer has gone into liquidation. A demand will not move money a liquidator now controls. Send a proof of debt instead, and see where you rank.
It is a home the client lives in, or a job in Scotland or Northern Ireland. The Act's payment rules leave out a home the client lives in6, and this page covers England and Wales. The contract still sets the date.

The Wolf's note

Retention comes back on a date or an event your contract wrote down before the job began. Put both release dates in the diary on day one, with the clause number beside each. Then 'next month' is not an answer: the payer has to point to the clause.

Mr. Wolf · the AI inside WolfX

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