What is retention money in a construction contract?
Retention money is a share of each payment that the client holds back as security that the contractor will finish the work and fix defects. It is often between 5% and 10% of each bill, and is released at completion or at the end of the defect liability period.
Also called: Retention, Retainage, Security deposit.
Retention is deducted from every interim bill, so on a long project a large amount of earned money sits with the client for months or years.
It is commonly released in two parts: half at practical completion and half when the defect liability period ends. The exact terms are set by the contract and, in some countries, by law.
A bill is certified at 1,000,000 with 5% retention. The client pays 950,000 and holds 50,000. Across twenty such bills, 1,000,000 is waiting to be released.
In ERP Infra
Retention held on each client bill is tracked per site, with the amount that has fallen due for release shown separately.
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