Your retention is due but the builder won't release it: start here

Why waiting costs you money

You completed your scope. The client paid the builder. The builder held back a percentage as retention, typically five to ten per cent of your claim. A builder may be entitled to the release of part of the retention amounts held upon practical completion of the construction, and the release of the balance upon expiration of a defects liability period. That period has now ended, and the money is still with the builder.

Retention held beyond the contractual release date is an overdue debt. The builder may be under financial pressure, paying some creditors ahead of others, or simply treating your money as working capital. If the builder enters liquidation before you act, cash retention usually ranks as an unsecured claim and recovery becomes unlikely.

Find the defects period end date in your contract

Defect liability clauses deal with faulty or incomplete work and specify the defect liability period, which is the time frame the contractor is responsible for fixing the work in scope. Your subcontract or purchase order sets the period, commonly twelve months from practical completion or from your final invoice date. If the contract does not define the start date clearly, identify which milestone triggered it: handover, final payment claim or sign-off of your scope.

Once you have the end date, confirm it in writing to the builder. State the contract clause, the commencement date, the length of the period and the calculated release date. Ask the builder to confirm that date or explain any disagreement. Keep the exchange on record. A clear written position removes ambiguity and starts the evidence trail if you later need formal recovery steps.

Source: Official guidance

Ask how the retention is held and where it sits

Retention can be held as cash, a bank guarantee or an insurance bond. The form determines your recovery approach. Cash retention is simply money the builder withheld from your progress claim. If the builder becomes insolvent, that cash is usually treated as the builder's asset and you become an unsecured creditor competing with others for whatever distribution the liquidator eventually makes.

A bank guarantee or insurance bond remains callable by you, even if the builder fails. The contract should specify which form applies. If it is silent or you are uncertain, ask the builder directly and request a copy of the instrument if it is a guarantee or bond. The difference matters: cash disappears in liquidation, but a valid security may be enforceable independently of the builder's solvency.

Send a formal written demand with a set deadline

Write to the builder stating the retention amount, the contract clause that requires release, the end date of the defects period and a clear deadline for payment, typically seven to fourteen days. Specify the payment method and account details. State that if payment is not received by the deadline, you will take further steps to recover the debt without further notice.

Send the demand by email and registered post to the builder's registered office and any site or accounts address you have used previously. Keep copies of the demand, delivery confirmation and any response. If the builder raises a defect claim for the first time in response to your demand, request written particulars, photographs and a costed scope of rectification. A vague assertion is not grounds to withhold the full retention.

Move quickly if the builder looks financially unstable

If the builder is paying other creditors late, if suppliers mention credit holds, or if you hear talk of cash-flow problems, treat the retention as urgent. A company in financial difficulty may enter voluntary administration or liquidation within days. Once that happens, you lose the ability to pursue the builder directly and must lodge a proof of debt with the appointed liquidator.

Do not assume you will be treated fairly because you completed good work or because the contract is clear. In an insolvency, the best way to protect your security interest as a creditor is by registering the interest in the PPSR, especially if your business includes retention of title clauses in their sale agreements. If you have not already registered a security interest over goods you supplied, consider whether that step is still open to you. For retention money itself, your practical options are to demand payment now, commence recovery proceedings promptly, or accept that you may be left chasing a distribution in liquidation. Contact CRP today if you need independent advice on the builder's financial position or the most effective recovery approach for your retention.