Retention money is a sum of money held by the employer as a safeguard for any defective or non-conforming work by the contractor. It is a percentage of money that an employer or an individual holds as protection from incomplete or inaccurate work done by the hired contractor. Retention money is deducted from the progress claim and kept by the employer to safeguard against defects that can occur during the defects liability period if the contractor doesn’t respond according to the contract terms. The amount of retention money, limit of retention, and release of retention are some of the common terms and activities involved in any construction project. Release of retention involves two different stages, the first release of retention and the second release of retention. Retention money provides protection to the employer and gives the idea of the importance of completing the signed project as per its terms and designs. The contractor has to complete the scope of work under their contract to receive the retention money amount withheld.
The purposes and benefits of retention money in construction include quality assurance, defect rectification, and financial security. Retention provides an incentive for the contractor to deliver high-quality work since they are motivated to ensure that no defects or issues arise during the retention period. If any defects or issues are identified after the completion of the project, the client can use the retained funds to cover the cost of rectifying them. Retention money acts as a sort of insurance policy for the owner, and owners with retention money specified in a contract have the peace of mind that comes with knowing the contractor is going to fully complete the job or risk losing money.
Retention money is a common practice in the construction industry where a certain percentage of the contract amount is withheld by the client from the contractor’s payment until the completion of the construction project. Retention money is usually a percentage of the total project cost and typically sits at 5% or 10%. The receiver or liquidator will be required to collect, manage, and disburse the retention money in the same way a payer is required to under the Construction Contracts Act.
In summary, retention money is a sum of money held by the employer as a safeguard for any defective or non-conforming work by the contractor. It is a percentage of money that an employer or an individual holds as protection from incomplete or inaccurate work done by the hired contractor. Retention money provides protection to the employer and gives the idea of the importance of completing the signed project as per its terms and designs. The purposes and benefits of retention money in construction include quality assurance, defect rectification, and financial security. Re...
