Retention clause: what it means, a typical example, and what to ask for
A retention clause lets the builder hold back part of each progress payment as security for defects, released later. The percentage matters, but so do the release dates: retention tied to the head contract or to the end of the whole project can stay with the builder for years.
A typical builder version
The Contractor may retain 10% of each progress payment until the total retained equals 10% of the Subcontract Sum. Retention will be released within 28 days after the Contractor receives release of retention under the Head Contract.
Illustrative wording of the kind found in builder-authored subcontracts, not taken from any one contract.
What it means for you
Ten per cent of your money is held, and you only get it back when the builder gets its own retention from its client, which may be long after your work is finished.
- Total security above 5% (retention plus any bank guarantee).
- Release tied to the head contract, the whole project or the builder's own receipt.
- A defects period that restarts with every rectification.
What market looks like
Retention (or combined security) capped at 5% of the subcontract sum, half released at practical completion of your works and the balance at the end of a fixed defects liability period. In New South Wales, retention on larger projects must be held in trust.
What to ask for
"Retention is 10% of each progress payment up to 5% of the Subcontract Sum. Half is released within 14 days of Practical Completion of the Subcontract Works and the balance within 14 days of the end of the Defects Liability Period."
Check the version in your contract
Paste your retention clause and get a plain-English verdict in seconds.
Free, no account. We don't keep the clause text. General information, not legal advice; by checking you agree to the Terms and Disclaimer.
Common questions
What is a normal retention percentage in Australia?
5% of the subcontract sum, typically deducted at 10% of each payment until the cap is reached, is the market position across the subcontracts we've analysed.
When should retention be released?
Half at practical completion of your works and half at the end of the defects liability period, on fixed dates, not when the builder is paid its own retention.
One clause rarely tells the whole story
The free scanner reads the whole subcontract, benchmarks every clause against the Index, applies your state's Security of Payment Act, and drafts the email to send the builder.
Scan my subcontract free →Keep reading
General information, not legal advice. Example wording is illustrative. Check any clause you rely on against your full contract and your state's Security of Payment Act. Written by Mat Kennedy, The Construction Contracts Co.