When should they stop taking retention off my payments?

Retention comes off every payment. On a long job that means it keeps growing, and on a job that overruns it keeps growing past the point where it is doing any work.

Most contracts deal with that by setting a limit: a ceiling on the total that can be held, usually expressed as a percentage of the contract sum. Once you hit it, the deductions are supposed to stop, even though the valuations carry on.

Why the ceiling exists

Because the purpose of retention is security for coming back and putting defects right, and that risk does not grow just because the job got bigger or longer. Past a certain point you are not providing more security, you are just lending more money.

The ceiling is the contract admitting that. It is one of the few parts of the whole mechanism that is on your side, and it is also the part nobody watches, because watching it means adding up every deduction since the first valuation.

What it looks like on a real job

Take a contract sum of three hundred thousand pounds, retention at five per cent, and a limit expressed as three per cent of the contract sum.

• Five per cent of every valuation comes off as you go.
• The total held stops at nine thousand pounds, which is the three per cent ceiling.
• Five per cent of a hundred and eighty thousand is nine thousand, so you reach the ceiling once you have been certified a hundred and eighty thousand, which is sixty per cent of the way through.
• Every valuation after that should carry no retention deduction at all.

That last line is where the money is. On the second half of that job, a deduction that should have stopped is six thousand pounds taken that should not have been.

What you should actually do

1. Find out whether your contract has a limit at all. It is in the contract particulars next to the percentage. If there is no ceiling, there is nothing to watch and the rest of this page does not apply to you.

2. Work out the money figure once, at the start. Not the percentage, the pounds. “Retention stops at nine thousand” is a number you can check against a certificate in five seconds. “Three per cent of the contract sum” is a number you have to work out every time, which means you will not.

3. Keep a running total of retention held. One column, one line per valuation. The moment it reaches the ceiling, the next certificate should show no deduction.

4. Say something in the month it happens. Over-deduction past the ceiling is not a grey area and it is not usually anybody being clever. It is a spreadsheet that was set up with a percentage and never given the cap. It is also much easier to correct in the next certificate than to unpick at the final account, when it has become one line in a long argument.

Watch for the ceiling and the drop at the same time

Two things change the deduction on a long job and they are easy to confuse.

The ceiling stops deductions once the total held reaches the cap. The drop at practical completion halves the rate and releases half of what is held. They are different events, they happen at different times, and a contract can have both.

If your job passes the ceiling and then reaches practical completion, you should see deductions stop first, then a release. Seeing neither is the common outcome, and it is worth about six thousand pounds on the example above.

If it has already been over-deducted

Ask for it in the next valuation rather than saving it up. Money held above the contract ceiling is not retention, because the contract does not entitle anybody to hold it. It is simply money withheld from a sum that was due.

If the response is that it is being kept back for some other reason, then that is a deduction and it needs to be treated as one: a pay less notice stating the sum considered due and the basis on which it is calculated, under section 111 of the Housing Grants, Construction and Regeneration Act 1996. Retention that has run past its own ceiling does not become something else because it is convenient.