What is
Retention Money?
Retention is the slice of every interim payment — typically 5–10% of each certificate — that the employer holds back as security for performance and defects, conventionally released half at taking-over and half at the end of the defects liability period. The UAE catch: retention is not held on trust. It is an unsecured debt of the employer — and for subcontractors, of the main contractor — which is why unreleased retention is one of the most common recovery briefs in the market.
How retention operates
Each payment certificate deducts the retention percentage until the cap — commonly 10% of the contract price falling to 5% at taking-over — is reached. The first moiety releases with the taking-over certificate; the second with the performance certificate at the end of the DLP. Between those dates, retention is the employer’s self-help fund for defects the contractor fails to remedy.
The insolvency problem
Because UAE law gives retention no trust or ring-fenced status, the holder’s insolvency leaves the payee as an ordinary unsecured creditor — a risk that runs down the chain, since subcontractor retention sits with the main contractor. The market answer is the retention bond: an on-demand guarantee exchanged for early release of cash retention, moving the credit risk to a bank. On long DLPs, that swap is usually worth the bank charges.
How much retention is typical in the UAE?
Ten per cent of each certificate, capped at 10% of the contract price, with half released at taking-over, is the most common pattern — 5% caps appear on larger or better-negotiated contracts. Subcontracts habitually mirror the main contract percentages, and often worse.
How do you recover unreleased retention?
Start from the certificates: identify the release triggers, evidence that they occurred — taking-over achieved, DLP expired, defects list closed — and demand formally. Employers rarely have a defence beyond unparticularised defect set-offs, which is why documented demands convert well, whether through negotiation, arbitration or the courts. Do not sit on it: claims age badly as projects demobilise and entities wind down.
Can pay-when-paid clauses hold up subcontractor retention?
They try. Whether a pay-when-paid clause defers subcontract retention release until the employer pays the main contractor depends on the drafting and how a tribunal characterises the clause — a timing mechanism or a true condition. Subcontractors should price that risk at tender, and paper the release triggers during the works.
Retention overdue for release?
Senior counsel only. We recover unreleased retention for contractors and subcontractors across the UAE.
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