What is retention (holdback) in a building contract?

How it works in Ireland

Retention is a contract term, not a right you have by default. Standard forms for building contracts include it, and the contract should state the rate, the cap, when each part is released and the defects period. Follow those terms, because you cannot invent a new release condition at the end of the job.

A common pattern deducts a percentage from each stage payment up to a cap. Half is released at practical completion, once the snag list is cleared, and the rest at the end of the defects period, often six or twelve months. The figures are illustrative and vary by contract. Record them, and diary the release dates.

Retention is not the same as your lender’s holdback. A lender holding money back does not by itself entitle you to withhold from your builder, and the builder’s contract controls the builder’s payments. Read the lender’s staged drawdown schedule alongside the contract’s so the two line up.

Separately, for defective services within Part 4 of the Consumer Rights Act 2022, section 91 provides a right to withhold payment and requires a statement to the trader. The amount must be proportionate to the reduction in value of what was supplied. Ask your solicitor whether it covers your contract before you rely on it.

Retention is also a protection if a builder fails. Money you have not paid is money you have not lost. See what to do if your builder goes bust.

A common mistake

Withholding the whole final payment because of a long snag list. A snag list does not automatically entitle you to hold every remaining payment. Withhold only what the contract or the law allows, in writing, with the defects listed. Get advice before holding a disputed sum.