When do I get the first half of my retention back?

You are three weeks from finishing. The client is already using half the house. Somewhere in your account is seven and a half thousand pounds of retention on a job worth three hundred thousand, and the first half of it comes back on one specific event.

That event is practical completion. Not the day you drive off site, not the day the client moves in, and not the day you send the last invoice. It is the day it is certified.

What practical completion actually is

It means the works are complete for all practical purposes: the client can take possession and use the building for what it was built for. Minor items that do not stop that are snags, and snags do not by themselves prevent it.

Whether it has happened is a judgement, and on your contract it is a judgement somebody else makes: the architect, the contract administrator, or on a domestic job often the client themselves. What matters to your bank account is that it is certified in writing, because that certificate is what your retention clause is keyed to.

What it releases, in money

Take the same three hundred thousand pound job at five per cent, with the rate dropping to two and a half at practical completion.

• During the works: fifteen thousand pounds held.
• At practical completion: the rate halves, which releases seven and a half thousand.
• Remaining: seven and a half thousand, held until the end of the defects period.

Two things about that first release catch people out, and both cost real money.

It does not arrive on its own. The rate has to actually drop in the valuation for the month practical completion falls in. If the client’s spreadsheet keeps deducting at five per cent, every certificate from then on is short, and nobody sends an apology.

It is not a payment, it is a smaller deduction. You will not see a cheque for seven and a half thousand. You will see the next certificate come out higher than the last one by that amount, which is exactly the sort of thing that goes unnoticed when three certificates arrive in a busy month.

What you should actually do

1. Ask for the certificate in writing, and ask early. An email saying “we consider the works to have reached practical completion on the fourteenth, please confirm” is enough to start the conversation. Verbal agreement that the job is done is worth nothing to your retention clause.

2. Check the very next valuation. Compare the retention line on the certificate before and after. If the deduction did not halve, say so in the month it happens, not at the final account.

3. Write down the second release date on the day the certificate arrives. Practical completion starts the clock on the defects period, which your contract will call the rectification period or the defects liability period. Six or twelve months is common. That date is the single most forgotten date in construction, because by then you are on two other jobs.

4. Keep retention separate from the argument about snags. A list of snags does not entitle anybody to hold more than the retention percentage. If the client wants to withhold more than that, he is making a deduction, and a deduction from the notified sum needs a pay less notice stating the sum and the basis for it, under section 111 of the Housing Grants, Construction and Regeneration Act 1996.

The second half is where the money goes missing

The first release is visible because the job is still live and everybody is still talking. The second one falls six or twelve months later, when the client has moved on, the architect has closed the file, and you are somewhere else entirely.

It is usually released against a certificate of making good, issued once the defects on the list have been put right. So there are two things to do and neither is difficult: do the defects, and ask for the certificate. What loses that money is not a dispute. It is silence.

Once it is due and unpaid it stops being retention and becomes a late payment like any other, and what you can do about that depends on whether your client is a business or a private individual. That is set out in the piece on what retention is for.

One question to ask before you sign anything

On a domestic job, ask who is going to certify practical completion. If the answer is the client, and there is no architect or contract administrator, then the person who decides when half your money comes back is the same person holding it. That is not a reason to walk away, but it is a reason to get the definition and the date into the contract in writing before you start.