Retention Money: How It Works and How to Get It Back

Retention is the slice of every payment, typically 5%, that the employer or main contractor withholds as security for quality and defect rectification. Half is normally released at practical completion and the balance after the defects period. The part most subbies miss: in South Africa retention is plain cash in the payer's hands, not money held in trust for you, so if the payer goes insolvent your retention is just another unsecured claim. Track it, diarise the release dates, and chase it like the debt it is.‍‌‌​‌​‌​‌‌‌​​​‌‌‌‌​​​​​​‌​‌‌​‌​‌‍

What retention is, and the real risk

On each interim payment certificate, the agreed retention percentage is deducted before you are paid. The payer holds it as security that you will finish properly and come back for defects. There is no default statutory trust or ring-fencing of retention money in SA: it sits in the payer's bank account with the rest of their cash. If they fail, you queue with the concurrent creditors (see When the Main Contractor Goes Insolvent). On a R2 million subcontract at 5%, that is R100,000 of your money carrying someone else's credit risk.

Typical percentages and release points

The detail lives in your contract data, but the standard forms run on familiar lines:

• JBCC: typically 5% of each interim payment; half released at practical completion, the balance at the end of the defects liability period (commonly around 3 months after practical completion). Check your own edition and contract data for the exact figures; documents at the JBCC.
• NEC4: retention exists only if secondary Option X16 is included; the percentage is in the Contract Data (5% is common). Half back on Completion of the whole of the works, the rest on the Defects Certificate. See NEC.
• FIDIC Red Book: 5 to 10% per the tender appendix; first half on the Taking Over Certificate, the rest when the Defects Notification Period ends.
• GCC 2015: typically 5 to 10%, released at completion and after the defects correction period.

If your contract has no retention clause (for example NEC without X16), nobody is entitled to deduct retention from you. Query any deduction that has no contractual basis.

Retention guarantees instead of cash

Many contracts, with JBCC an early adopter in SA, allow you to provide a retention guarantee (a bank or insurance instrument) instead of having cash withheld. The employer gets equivalent security; you keep your cash flow. You pay a premium for the instrument, so weigh the cost against what idle retention does to your working capital (more in Penalties and Performance Guarantees).

The subcontractor trap: tied to the main contract

The classic abuse: your subcontract retention is only released when the main contract reaches practical completion, or when the main contractor gets its own retention back. Your work might be done a year before either happens. Practitioners' standing advice is to make sure the release of your retention is tied to your subcontract milestones, not to the completion of the main contract or the release of the main contract's retention fund. Negotiate that line before you sign, because afterwards it is just the deal you made.

How to chase unreleased retention

1. Check the trigger dates. When was practical completion certified? When does the defects liability period expire? Your entitlement runs from those certificates.
2. Demand in writing once a trigger passes: state the amount, the clause, and attach the certificate.
3. No response within 14 days: refer the matter under the contract's dispute clause, usually adjudication (see Adjudication, Mediation and Arbitration).
4. Determination ignored: enforce through the courts (see Chasing Unpaid Invoices).
5. Keep the paper: payment certificates showing the deductions, the practical completion certificate, the defects list and sign-off. Those documents are the claim.

Remember prescription: retention that fell due and was quietly forgotten prescribes three years later like any other debt.

Worked example

Dineo's electrical subcontract reaches practical completion on 1 August. Her contract withheld R40,000 retention, with half due on practical completion. By mid-September nothing has been paid. She writes to the principal agent demanding R20,000, attaching the practical completion certificate, and gives 14 days. No response, so she refers the claim to adjudication under the subcontract; the adjudicator orders R20,000 plus interest. The remaining R20,000 falls due when the 3-month defects period ends on 1 November, assuming her defects are cleared, and she diarises that date the same day.

Common mistakes

• Not tracking retention at all. Reconcile every certificate; know exactly what is held and when each slice falls due.
• Signing release-on-main-contract-completion wording. Your money waits on a project you do not control.
• Treating retention as safe. It is unsecured cash in someone else's account.
• Letting the defects period drift. No defects sign-off, no final release; chase the inspection.
• Sleeping on prescribed retention. Three years after it fell due, it is gone.

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