When must retention be released under a JCT DBSub/C subcontract? Standard JCT subcontracts release 50% of retention at Subcontract Practical Completion, and the remaining 50% following the issue of the Notice of Completion of Making Good for the subcontract package. Some bespoke amendments modify the retention provisions (Clauses 4.12 and 4.13) by tying the final release to overall Main Contract completion or certification, which may defer release of working capital for an extended period.
In UK commercial construction, cash retention is designed as security against defective work, not as a long-term financing facility for upstream contractors.
Under standard subcontract forms, an agreed percentage (typically 3% or 5%) is deducted from each interim valuation. The first moiety (50%) is released upon Subcontract Practical Completion, and the second moiety is released following the end of the defects rectification period for that package.
For many specialist trade subcontractors, retention deductions can represent a substantial proportion of their profit margin. When a package is completed and the initial rectification period passes, subcontractors occasionally discover that the contractor refuses release on the basis that the main contract defects period remains ongoing across the wider site.
Reviewing draft schedules of amendments before signing ensures you identify whether bespoke retention drafting defers release milestones beyond the scope of your subcontract works.
1. Technical Authority: Clauses 4.12, 4.13 and the Two Retention Moieties
Under standard unamended JCT Subcontract Conditions (including DBSub/C 2016 and 2024, and SBCSub/C 2016 and 2024), retention release is structured around two clear milestones within Section 4:
- First Moiety (50% Release): Half of the accumulated retention percentage is released in the interim payment following Subcontract Practical Completion.
- Second Moiety (Final 50% Release): The remaining retention balance is payable following the issue of the Notice of Completion of Making Good (under DBSub/C Clause 2.24) or the Certificate of Making Good Defects (under SBCSub/C), confirming the close of the package defects rectification period.
When bespoke amendments alter these clauses, they frequently substitute the package-specific milestone with wider site completion requirements, such as the issue of the Main Contract Certificate of Making Good Defects.
2. Commercial Practicalities: Upstream Certification Traps
Where bespoke amendments tie retention release to the head contract, the commercial effect may be to leave the main contractor holding the retention for longer across the entire supply chain.
For early-stage packages such as groundworks, piling, or structural framing completed in the initial months of a multi-year project, tying retention release to overall main contract completion leaves the trade contractor financially exposed to upstream completion events. The trade contractor may wait years for its final account release while other trades complete downstream packages.
3. Statutory Framework: Section 110 and Section 113
When reviewing bespoke clauses that link payment to upstream events, subcontractors should test the wording against the statutory provisions of the Housing Grants, Construction and Regeneration Act 1996 (as amended):
- Section 110 (Adequate Payment Mechanism): Section 110 requires a construction contract to contain an adequate mechanism for determining what payments become due and when, together with a final date for payment. It also contains restrictions on provisions that make payment conditional on performance under another contract or on a decision under another contract about whether obligations have been performed. The precise effect depends on the contract wording and any applicable statutory exception.
- Section 113 (Prohibition of ‘Pay-When-Paid’): Section 113 generally renders ineffective provisions that make payment conditional upon the payer receiving payment from a third party. The Act provides a narrow exception where that third party is insolvent, but this statutory insolvency exception must be verified against the exact contractual drafting and factual circumstances.
- Application of the Scheme: Where a payment clause fails to comply with the statutory requirements of Section 110, the inadequate contractual provisions are replaced by the relevant terms of the Scheme for Construction Contracts (or the Scheme for Construction Contracts in Scotland, where Scots law applies).
4. Commercial Risk Factors and Loss Aversion
Accepting amended retention release terms creates distinct commercial exposures:
- Main Contractor Insolvency: Under UK commercial practice, retained funds are rarely placed into a separate bank trust account unless expressly mandated. If a main contractor collapses while retention remains unpaid, recoverability depends on the executed terms and insolvency proceedings, leaving unsecured retention at risk.
- Extended Working Capital Lockup: Carrying cumulative retention balances across several long-term schemes restricts business liquidity and limits operational capacity to finance new commercial packages.
- Disputed or Unsupported Snagging Deductions: When final retention release is deferred for extended periods, staff changes and site reorganisations often make it more challenging to resolve disputed or unsupported snagging deductions against the original package.
Illustrative Tender Qualification: Retention Release Redline
When reviewing a draft subcontract, watch out for retention release triggers tied to the wider main contract. Specialist trades often propose a protective commercial qualification during tender negotiations, subject to a review of the specific contract form:
Illustrative Retention Negotiation Redline
- Proposed Deletion: Seek to remove any drafting stating that retention is “payable following the issue of the Main Contract Certificate of Making Good Defects”.
- Proposed Insertion: “The second moiety of retention shall become due within 14 days of the expiry of the Sub-Contract Rectification Period (not to exceed 12 months from Sub-Contract Practical Completion), subject only to the rectification of notified defects in the Sub-Contract Works under Clause 2.24.”
- Alternative Bond Proposal: “In lieu of cash retention deductions under Clause 4.12, the Sub-Contractor shall provide an industry-standard JCT Subcontract Retention Bond (Form SCBnd/R) in accordance with Clause 4.13.”
(Note: This qualification is an illustrative example of commercial negotiation wording and does not constitute formal legal drafting. Terms must be adjusted to match the executed contract edition.)
Frequently Asked Questions: JCT Retention Release
When is retention released under standard JCT DBSub/C 2016?
Under unamended JCT DBSub/C 2016 Clauses 4.12 and 4.13, the first moiety (50%) of the retention fund is released in the interim payment following Subcontract Practical Completion. The remaining 50% moiety is released following the issue of the Notice of Completion of Making Good under Clause 2.24.
Can a main contractor tie your retention release to main contract certification?
Section 110 of the Construction Act 1996 restricts provisions that make payment conditional on performance under another contract or on a decision under another contract about whether obligations have been performed. However, some bespoke amendments seek to defer release of the final retention moiety until main contract completion. Subcontractors should examine whether such amendments comply with Section 110 and its statutory exceptions.
What happens if a subcontract retention mechanism breaches Section 110?
Where a payment mechanism fails to satisfy the statutory requirements of Section 110, the inadequate contractual provisions are replaced by the relevant statutory default provisions contained in the Scheme for Construction Contracts.