Retention Recovery for Subcontractors: How to Get Your Money Back

Ask a room of subcontractors how much retention they have written off over the years and the number is always worse than expected. Industry surveys have put unpaid retention in the hundreds of millions, and most of it is not lost to insolvency. It is lost to inertia: the second moiety falls due, nobody chases it with any structure, and eighteen months later it is quietly written off as the cost of doing business. It is not a cost of doing business. It is your money, and recovering it is usually a process problem, not a legal one.

Know your dates before you chase

Retention recovery starts with three facts from your subcontract: the retention percentage, the trigger for release of the first half, and the trigger for release of the balance. Typically that is practical completion for the first moiety and the making good certificate or the end of the rectification period for the second. Pin the actual dates with the actual certificates. A demand that says please release our retention gets filed; a demand that says the second moiety of 12,400 pounds fell due on 14 March under clause X, no pay less notice has been served, and payment is required within seven days gets read.

The pay less notice point most subbies miss

Once retention falls due it is a sum due like any other, and the payment machinery applies to it. If the main contractor wants to hold it against alleged defects or a contra charge, it needs to say so in a valid pay less notice served in time, stating the sum considered due and the basis of calculation. Vague mutterings about snagging in an email do not qualify. No valid notice, and the notified sum route we describe in our smash and grab guide applies to retention just as it does to an interim application.

Escalation that actually works

The sequence that recovers retention is boringly consistent. A precise written demand with the contractual basis and a deadline. A follow up that adds the statutory interest and compensation accruing under the Late Payment legislation, which concentrates minds. A letter setting out the adjudication position, drafted so the recipient's advisor can see how the referral ends. And then, for the minority that still do not pay, a short, narrow adjudication about dates and notices that is over in weeks.

Defects allegations, the standard defence, need to be tested rather than accepted. Were they notified during the rectification period, were you given the chance to return and make good, and is the sum withheld a genuine estimate or a number picked to swallow the retention? Contra charges get the same scrutiny. The pattern where a plausible sounding back charge appears only when retention is demanded is one we see constantly, and it rarely survives daylight.

The bigger fix is cultural: track retention like debt, not like a rounding error. Every live and completed job, both moieties, due dates, chased dates, on one page, reviewed monthly. Our outsourced QS service runs exactly that discipline for subcontractors, and our adjudication team picks up the stubborn ones. Most balances, though, come home with nothing more than a proper letter sent at the proper time.

Common questions

When does retention become due for release?

Typically half at practical completion of the works or the subcontract works, and the balance at the end of the rectification period or issue of the certificate of making good, subject to your subcontract terms. The dates are ascertainable from certificates and notices, and once due, retention is simply money owed like any other sum.

Can a main contractor keep my retention because of its own dispute with the employer?

Generally no. Pay when certified and pay when paid mechanisms are heavily restricted by the Construction Act, and a main contractor's cash flow argument with the employer is not, by itself, a defence to releasing your retention. The terms of your subcontract still need checking, but do not accept the excuse at face value.

Is adjudication worth it for a small retention balance?

Often yes. Retention adjudications are usually narrow, quick and cheap because the questions are contractual dates and notices, not the whole account. A well drafted letter before action citing the due date and the absence of a valid pay less notice frequently produces payment without a referral at all.