The retention ban: what it means for you

The government is banning cash retentions in construction contracts. It is the biggest change to subcontract payment since the Construction Act. This page tracks where the law has got to and what to do while it goes through.

Last checked 25 October 2026. The bill can still change. This is a summary, not legal advice.

Where it has got to

Jul to Oct 2025ConsultationThe Department for Business and Trade consulted on either banning retentions or making them be held in protected accounts.
24 Mar 2026Ban announcedThe government chose an outright ban on cash retentions in construction contracts, alongside a 60-day cap on payment terms and tougher late payment rules.
19 May 2026Commercial Payments Bill introducedThe bill started in the House of Lords after the King’s Speech.
20 Oct 2026Passed the House of LordsThird reading in the Lords finished with no further amendments. The bill now goes to the House of Commons.
NextHouse of CommonsMPs debate the bill and can still change it.
ThenRoyal AssentThe bill becomes an Act. The retention rules still do not start until the government sets a date in regulations.
Start date + 2 yearsTransition endsNew retention clauses can be agreed during a two-year transition. After that, new retention clauses are void.
Start date + 3 yearsTransitional retentions releasedMoney held under clauses agreed during the transition must be released one year after the transition ends, as the bill stands.

In short: nothing changes on your current jobs yet. Even once the bill becomes law, there is a two-year transition from a start date the government has not set. So retention is likely to stay in most subcontracts for some time yet.

What the bill says, as it stands

Retention clauses are banned in construction contracts. That means any clause letting the payer deduct or hold back part of a payment until a condition is met, such as making good defects.
Two-year transition. From the start date, new retention clauses can still be agreed for two years. After that, new ones are void.
Money held under clauses agreed in the transition must be released within one further year, whatever the contract says.
Clauses agreed before the start date appear to be unaffected, so retention on those jobs runs to the end of the defects period as the contract says.
A penalty for unlawful retention. As the bill was introduced, a contractor who withholds retention after the transition can be made to pay it plus a further 50%. Lawyers have pointed out gaps in how this is worded, so it may change.
The same bill sets a 60-day maximum payment period for private construction contracts (30 days where a public body pays), with exemptions based on business size, and gives the Small Business Commissioner new powers over late payment.

What contractors may ask for instead

Main contractors and clients will still want security for defects. Expect to be asked for one or more of these:

Retention bonds

A bank or insurer guarantees the money that would have been retained. If you do not fix defects, the contractor claims on the bond and the provider recovers it from you. You keep your cash, but you pay a premium and the provider will look hard at your accounts. Bonds are already allowed and you can offer one today to get cash retention released.

Insurance-backed defects cover

Cover that pays to put defects right if you do not. Less common in landscaping, but likely to grow once retentions go.

A bigger final payment

The last stage payment is held until practical completion or the end of the defects period. Watch this one: if it works like a retention, it may be challenged as one. Check how the final stage is worded before you sign.

Longer defects periods and tighter notice terms

Expect more detailed defects clauses, shorter times to attend, and contractors recovering the cost of others fixing your defects. For soft landscaping, make sure plant failures caused by lack of watering or damage by others are excluded.

What to do now

Chase what you are owed. Retention already held is not affected by the ban. Log every job and release date in the payment tracker and send the release request the day it falls due.
Do not agree longer retention periods or new retention terms you would not have accepted before. The transition is not a reason to give more away.
Read the final payment terms on new orders. Retention under another name is the most likely way round the ban.
Get your accounts in order. Bond providers price on your balance sheet and filed accounts. Up to date, clean accounts mean cheaper cover.
Price the difference. If a contractor wants a bond instead of retention, the premium is a cost of the job. Include it.

TLGB retention bond and defects cover

We are talking to providers about a scheme for members: retention bonds and defects cover priced for small landscaping and external works firms, using your TLGB record to help with the checks. Tell us you are interested and roughly how much retention you have tied up. It helps us show providers there is demand, and we will let you know when it is ready.

Sources

Payment dates calculator All guides