On construction and service contracts, retention money protects the client against defects or reservations noted after completion. Poorly tracked, however, it becomes a recurring source of disputes with contractors: unjustified withholding, delayed release, or simply forgetting to release it when due. Here are the best practices for securing this tracking process.
Formalize the rules at contract signing
The retention rate, its calculation basis (on the pre-tax amount of the contract or of each payment statement), the withholding period, and the release conditions must be defined unambiguously in the contract or amendment. An imprecise clause is the leading cause of disagreement at the time of release.
Track the calculation statement by statement
Retention money is generally built up progressively through interim payment statements, as the work advances. Structured tracking that links each retention deduction to the corresponding statement prevents discrepancies between the amount theoretically due and the amount actually withheld.
Track deliverable acceptance and reservations
The release of retention money is conditional on the acceptance of the work, with or without reservations. Precisely documenting each acceptance — date, any reservations, deadline for clearing reservations — is essential to objectively justify a release or, conversely, a continued withholding.
Anticipate release deadlines
Once the warranty period has elapsed and any reservations have been cleared, release must take place without unjustified delay: beyond a certain point, it can be challenged by the contractor as a disputable debt. Automatic alerts on release deadlines prevent oversights, which remain the leading cause of disputes on this topic.
In summary
Payment statements, deliverables, and retention money form a whole that must be managed consistently, with full traceability of contract execution. This is the purpose of SEMS's Contract Management module.
