Retention

Retention is a portion of the contract price — typically 5-10% — that you hold back from your contractor until the project is fully finished and any defects have been corrected. It’s a standard practice in the construction industry that gives contractors a financial incentive to complete all work to the agreed standard.

How retention works

At each payment milestone throughout your renovation, you pay the agreed amount minus the retention percentage. For example, if a payment stage is worth $10,000 and retention is 5%, you pay $9,500 and hold back $500.

The retained amount accumulates over the project and is typically released in two stages:

1. Half at practical completion — when the main work is substantially finished
2. The remaining half at the end of the defects liability period — once any snags or defects have been resolved

Why retention matters

Retention protects you because:

• It gives the contractor a reason to come back and fix any issues after the main work is done
• It ensures the snagging list gets addressed promptly
• It provides financial leverage if disputes arise about work quality
• It’s standard industry practice, so professional contractors expect it

Tips for homeowners

• Agree on retention terms before work starts — include it in your contract
• Keep clear records of how much you’ve retained at each stage
• Release retention promptly when the conditions are met — withholding it unreasonably damages the relationship and may breach your contract
• Be fair — retention is meant to cover genuine defects, not to renegotiate the price after the fact

Most professional contractors working on home renovations accept retention as a normal part of doing business. If a contractor refuses retention entirely, it may be worth asking why.