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 under FIDIC forms
Most UAE construction contracts are built on FIDIC. Under the 1999 Red Book the Engineer deducts retention from each interim certificate at the percentage stated in the Appendix to Tender, until the amount held reaches the stated limit (clause 14.3). The first half is certified for payment when the Taking-Over Certificate is issued for the Works, and the balance promptly after the last Defects Notification Period expires (clause 14.9). Where sections are taken over separately the release is proportionate, and if remedial work is still outstanding at the end the Engineer may hold back the estimated cost of that work and no more.
UAE employers routinely amend these clauses in the particular conditions. Look for release tied to a performance certificate, an agreed final account, or a no-objection from a master developer or authority, because each one adds months to the wait.
Cash retention, retention bond or performance bond
| Security | What the employer holds | What it costs the contractor | Main risk |
|---|---|---|---|
| Cash retention | Money the contractor has earned, withheld from each certificate | Cash flow for the whole defects period | The employer's solvency and unparticularised set-offs |
| Retention bond | A bank guarantee given in exchange for the cash | Bank charges and room on the contractor's facility | An unfair call on an on-demand instrument |
| Performance bond | A separate bank guarantee, commonly 10% of the contract price | Bank charges for the life of the project | It sits alongside retention, not instead of it |
The three are often confused at tender. Retention and the performance bond secure overlapping risks, so a contractor giving both should negotiate the retention cap down or agree a retention bond from taking-over.
How long you have to claim
Retention is a debt that falls due on its release trigger, so time runs from that date and not from the end of the project as a whole. For obligations between merchants the limitation period is five years from the date performance falls due, under Article 92 of the Commercial Transactions Law (Federal Decree-Law No. 50 of 2022). Contracts concluded on or after 1 June 2026 fall under the new Civil Code, and limitation periods that had started but not finished on that date move to its rules, so an older claim should be checked against both.
The practical deadline is shorter. Once a project company has demobilised or been wound down, a judgment for retention is worth far less than a demand made while the employer still needs the contractor.
A checklist for getting retention released
- Read the release triggers in the particular conditions, not the general conditions.
- Get the taking-over certificate issued. If the employer is using the works without one, record that in writing on the day it starts.
- Close the snag list and have it signed off, with photographs and inspection records kept on file.
- Diarise the end of the defects liability period and apply for the performance certificate before it expires.
- Show retention as its own line in the final statement so it cannot be netted off silently.
- Send a formal demand that cites the clause and attaches the certificates, then follow the steps in the dispute clause.
- If you are a subcontractor, ask for evidence of taking-over under the main contract. If the main contractor has been paid its own retention, say so in the demand.
Retention overdue for release?
Senior counsel only. We recover unreleased retention for contractors and subcontractors across the UAE.
Construction Counsel →