What is retention in construction payments and when is it released?

• A. A portion of payment withheld until project completion or upon meeting specified conditions; released after acceptance
• B. A bonus for early completion
• C. A discount for early payment
• D. A tax withholding

Answer: (A)

Retention is a holdback of a portion of the contract amount that the payer keeps until the project reaches a defined completion status or until specified conditions are satisfied. It protects the owner by ensuring work is finished properly and defects are corrected before the full payment is released. The release happens when the work is accepted—typically after substantial completion and final acceptance—and once any required items are completed (punch list work), warranty periods are met, and any necessary lien waivers or contract conditions are fulfilled. This is distinct from a bonus for early completion, a discount for early payment, or a tax withholding.