What the retention is holding, and when it comes back

Retention is a deduction the payer makes from what the work is worth, held as security against defects and against the contractor walking away before the job is finished. It is your money, sitting in someone else account, and it earns nothing while it waits.

How it builds on the claim

Each payment claim states the gross value of the work, then deducts retention at the contract percentage up to the contract limit. Once the cap is reached, no further retention is taken, and later claims release the full value of new work. Getting this right on the build-up is what stops the payer over holding as the job grows.

• The rate. A percentage of the value certified, deducted each cycle until the limit bites.
• The limit. A cap on the total held, expressed against the contract sum.
• The release points. A tranche at practical completion and the balance at the end of the defects period, as the contract sets out.

Release under NZS 3910

Under NZS 3910:2023 the retention is released against defined milestones. A portion falls due when the Engineer to the Contract certifies practical completion, and the balance falls due once the defects liability period has run and outstanding defects have been made good. Each release is claimed like any other sum, through a payment claim, and answered by a payment schedule.

The retention money regime

New Zealand law requires retention money withheld under a construction contract to be held on trust for the party it was taken from. That protects the contractor if the payer becomes insolvent while the money is still held. It does not change the mechanics of claiming, it changes what happens to the money in the meantime, and it is worth knowing which pool your retention sits in.

Retention on variations

Variations added to the works attract retention on the same basis as the original scope, up to the same overall limit. When you value a variation into a payment claim, the retention deduction follows it, and the release of that retention follows the same milestones as the rest of the account.

The discipline

Keep a live retention statement alongside the payment claims, showing held to date, released to date and the next release date. Claim each tranche the moment it falls due, because retention is the last money on the job and the easiest to forget.