Retention and stage payments: paying a builder safely

The principle: pay for progress, not promises

At any point in the job, the money you have paid should be no more than the value of the work done and materials delivered to site. If the builder walks away tomorrow, you want to be able to pay someone else to finish without having paid twice. Stage payments and retention are how a contract keeps you there.

Deposits

A deposit is a payment before work starts. For domestic work it is common for builders to ask for something, usually to cover materials with long lead times such as windows, steels or a kitchen.

• Reasonable: up to about 10% of the contract sum, or the actual cost of specific made-to-order items, paid close to when they are ordered.
• Questionable: 25% or more, with no clear link to materials.
• Protect it: pay by bank transfer or card, never cash. Paying part by credit card can give extra protection under section 75 of the Consumer Credit Act for amounts within its limits. Some trade schemes offer deposit protection.

In our worksheet the deposit is credited back across the stage payments, so the total you pay still equals the contract sum.

Stage payments

There are two common ways to pay during the build:

• Milestones: a fixed amount or percentage when a defined stage is reached, such as foundations complete, walls to plate height, roof watertight, first fix, plastered, practical completion. Easy to understand for homeowners.
• Interim valuations: once a month the contract administrator values the work done so far. This is how JCT Minor Works runs by default, and it needs a professional to do the valuing.

Milestones need clear definitions. "Roof complete" should say whether it means structure, covering, rooflights and gutters, or just the structure.

Notice the last stage is substantial. A plan that leaves only 5% for the end gives the builder little reason to finish the snagging.

How retention works

Under JCT Minor Works the default retention is 5% of interim payments, reducing to 2.5% at practical completion. The JCT Home Owner contracts handle the final payment differently, and many domestic builders propose their own terms. Whatever the form, write down:

• the retention percentage;
• when the first half is released (practical completion);
• the length of the rectification period (the JCT default is 3 months; 6 or 12 months is common for homes);
• that the final half is released once the listed defects are put right.

Is 5% enough? Retention is not meant to fund a full repair job. It is an incentive for the builder to come back. On a £60,000 job, £1,500 is enough to make a builder return for a sticking door or a cracked bead, not to rebuild a leaking roof. For serious defects you rely on the contract and the builder's liability, which continues well beyond the rectification period.

Keeping a payment record

Keep a simple running record from the first payment. For each one note the date, the stage or valuation it relates to, the gross value, the retention held, any deposit credit and the amount paid. Our payment schedule prints in exactly this format. It takes a few minutes per stage and settles most arguments about what has been paid before they start.

The final account

Before the last payment, agree a final account: the contract sum, plus or minus every variation, with provisional sums replaced by actual costs. Make sure every variation was priced or recorded at the time. Disputes about the final account are much easier to avoid than to resolve.

Paying less than asked

If a stage is claimed but not complete, or work is defective, you can pay less, but do it properly. Under JCT forms, you must give a pay less notice by the deadline in the contract, stating what you will pay and why. Under the Home Owner contracts the procedure is simpler but should still be in writing. Never just stop paying without explanation; it hands the builder a grievance and can justify them suspending work.

The proposed ban on retentions

The government has committed to banning retention clauses in construction contracts. The Commercial Payments Bill was introduced in the House of Lords in May 2026, completed its Lords stages on 20 October 2026 and had its first reading in the Commons on 21 October. On 2 November 2026 it is not law; Commons second reading has no date yet. Even after Royal Assent, the retention provisions take effect only from a commencement date the government will set. Two points matter for homeowners:

• The ban works by amending the Housing Grants, Construction and Regeneration Act 1996. That Act largely excludes contracts with a residential occupier for work on their own home, so commentators expect many homeowner contracts to fall outside it. Check the final wording once enacted.
• Even where it applies, the Bill as sent to the Commons allows a two year transition after the provisions come into force, during which retention clauses can still be agreed. A full ban is therefore some years away, and the Bill may still change in the Commons.

The Bill also makes clear that genuine staged payments remain allowed. If retention does disappear from your contract, a well-designed stage plan with a meaningful final stage, and a clear defects procedure, does most of the same job.

Common questions