What Is Retention Money in Building? A Simple Explanation

You're nearing the end of a building project. The big stuff is done, but there's a list of little things: a bit of touch-up paint, a wonky door handle, grouting that needs finishing, a light fitting that's not quite right.

This is where retention money comes in. It's a small percentage of the final payment that you hold back until all those snagging items are completed.

Here's how it works, why it exists, and what's considered fair.

What Is Retention Money?

Retention (sometimes called retainage) is a portion of the contract price — typically 2.5% to 5% — that's held back until the builder has completed all agreed snagging work.

Let's say the total job is £20,000 and you've agreed a 5% retention. That means:

• You pay £19,000 at practical completion (when the main work is finished)
• You hold back £1,000 until the snagging list is completed
• Once the snagging is done, you release the final £1,000

It's not a penalty. It's an incentive for the builder to come back and finish the small stuff properly.

Why Does Retention Exist?

Building projects nearly always have a snagging list. That's normal. The problem is: once a builder has been paid in full, there's less urgency to come back for the little jobs.

Not because builders are trying to dodge the work — it's just human nature. When the big money has landed, the priority shifts to the next job.

Retention solves this. It keeps a small amount in play until everything on the list is properly finished. Both sides know the terms upfront.

When Does Retention Get Released?

Typically, retention is released 30 to 90 days after practical completion. Here's how it usually works:

1. Practical completion. The main work is done. You and the builder agree a snagging list (minor defects or unfinished items).
2. Snagging period. The builder comes back within an agreed timeframe (usually 7-30 days) to complete the snagging list.
3. Final inspection. You check the work. If everything's done, you release the retention.
4. Retention released. The final payment is made, and the contract is complete.

The exact timing should be in your contract. Don't just hold retention indefinitely — that's not fair to your builder.

What Counts as Snagging?

This is where disputes happen. Not every minor annoyance is a snagging item.

Genuine snagging items:

• Touch-up paintwork needed in a couple of spots
• A door that needs adjusting
• Grouting that needs finishing or cleaning
• A socket or fixture that needs securing
• Minor defects that were missed in the final clean

Not snagging items:

• Work that was never in the original scope ("Can you just add a shelf while you're here?")
• Changes to the design or finish you've decided you want
• Wear and tear after you've been using the space for weeks

Snagging is about completing the originally agreed work to the agreed standard. It's not a free maintenance period. For a comprehensive guide on the snagging process and how disputes are resolved, see our article on snagging disputes and what counts as finished.

What If There's a Dispute About Snagging?

Let's say the builder thinks they've finished. You disagree — there are still items on the list that haven't been done properly.

This is where having a clear snagging process in your contract is crucial. A good clause will say:

• How snagging items are identified and agreed (usually in writing at practical completion)
• How long the builder has to complete them
• What happens if there's a dispute (e.g., you can hire someone else to complete the work and deduct the cost from retention)

If you don't have this written down, it becomes a negotiation — and that's when things get messy.

How Much Retention Is Fair?

For most domestic jobs, 2.5% to 5% is standard. Anything higher and you're asking the builder to leave a significant chunk of their profit on the table, which impacts their cash flow.

For very small jobs (under £5,000), retention might not be necessary at all. For larger projects (£50,000+), 2.5% might be sufficient.

The amount should be proportionate. It's there to incentivise completion, not to punish the builder or give you a massive safety net.

Can I Add Retention If It's Not in the Contract?

No. If your contract doesn't mention retention, you can't just decide to hold back money at the end. That would be a breach.

Retention needs to be agreed upfront, in writing, before the work starts.

This is one reason why a written contract with a clear retention clause is so important. Both sides know the terms, and there's no argument when you get to the end of the job.

The Bottom Line

Retention isn't complicated. It's a small percentage held back to make sure the job gets finished properly. It protects you, and it's completely standard practice.

Just make sure it's in the contract, the percentage is fair, and you release it promptly once the snagging is done. Simple as that. For a full breakdown of how retention fits into the wider payment schedule, see our stage payment guide for UK extensions.

TradeContract includes a retention clause so both sides know the terms from day one. See how it works.