Note
What Your Retention Clause Must Say
Retention is the portion of each stage payment the main contractor holds back until after a defects period ends. On most Thai subcontracts it sits at 5%. The clause sounds routine, but four things inside it determine whether that money ever becomes something you can invoice: the defects period duration, the release trigger, the release conditions, and who signs the release document.
Most subcontractors check the percentage, find 5% standard, and move on. The percentage is rarely the problem. The missing date is.
What does a retention clause actually contain?
A well-written clause names four elements clearly.
First, the percentage held from each payment. Second, how long the defects liability period runs. This is often written as 365 days from practical completion, but “practical completion” is a defined event in the main contract, and that definition may be later than you expect. Third, what document triggers the start of the defects period and whose signature activates it. Fourth, the procedure for requesting release: a written notice, an inspection result, a final account statement, or some combination.
Vague clauses in Thai subcontracts often name the percentage and leave the rest pointing to “the conditions of the main contract with the employer.” If you have not read that main contract, you have agreed to hold your own money under terms you cannot verify.
What happens when the defects period is not defined?
When the clause says “after the defects period” without naming a length, the main contractor can extend it for as long as any defect is claimed to exist. On a project with ongoing snagging, that can run for years.
The fix is to name the period in the agreement: “365 calendar days from the date of the acceptance certificate for the final stage, signed by the main contractor’s site manager.” That converts a floating obligation into a calendar date.
If the main contractor will not name a period, note it in writing and factor it into whether you take the job.
Why does the release trigger matter more than the percentage?
The percentage determines how much is held. The release trigger determines whether you can ever invoice it.
A trigger that reads “upon issuance of the employer’s certificate of completion” puts the clock in the employer’s hands. If the employer disputes completion elsewhere, your retention sits frozen while a timeline you did not cause plays out.
A stronger version reads: “upon expiry of 365 calendar days from the date of final stage acceptance signed by the main contractor, provided no written defect notice has been issued during that period.”
That gives you a specific date. On that date you issue a written release request. If no response comes within 30 days, you have a documented starting point for escalation. Without a date, there is no starting point.
Is the defects clock tied to your work or to the whole project?
Some subcontracts start the clock from your own final stage acceptance. Others start it from the main contractor’s overall project completion. These can be months or years apart. Before signing, confirm which event starts your defects period, and get it in the document, not in a LINE chat.
A worked example: two retention clauses, same project
Two subcontractors on the same project each hold 5% retention on a 2,000,000 baht contract, so 100,000 baht each.
Subcontractor A signed: “Retention is held until the main contractor is satisfied that all defects have been rectified.” No period, no trigger, no procedure.
Subcontractor B signed: “Half is released upon acceptance of the final stage. The remaining 2.5% is released 365 calendar days from that acceptance certificate, provided no written defect notice has been issued and subject to a written release request.”
One year later, A has no date to point to. B sends the release request, 50,000 baht becomes invoiceable on a named date, and there is a paper trail if the payment stalls.
The difference is not the rate. It is the date and the procedure.
What can you actually negotiate before you sign?
You will not always get everything. But you can usually get at least one of the following.
A named defects period. 365 days is standard; 730 is not unusual on projects with a full annual weather cycle. If the main contractor says the term comes from the employer’s contract, ask to see the relevant section. You are agreeing to hold money under terms you have a right to read.
A named trigger and signatory. “Acceptance certificate signed by the main contractor’s project manager” is specific. “Upon completion” is not.
A written procedure for requesting release. Even one sentence is enough. “The subcontractor may request release in writing on or after the expiry date. The main contractor shall respond within 30 days” creates a clock on the main contractor’s side.
If the main contractor declines all three, that refusal is itself a data point. Most retention chases begin with a clause that gave the chasing party nothing to point to.
How does this connect to the timeline?
When you build a project timeline with billing stage pins, retention release dates belong on that same line from the start. A stage accepted on 1 October with a 365-day defects period has a release request date of 1 October next year. That pin goes on the timeline at setup. If the clause does not name a date, the pin cannot be placed.
Retention with a clear date in the contract is a billing stage you can plan for. Retention in a vague clause is not a billing stage yet. The clause is what converts it into one.
FAQ
Can I negotiate the retention percentage in a Thai subcontract?
Most main contractors treat the rate as fixed, and in practice the more useful negotiation is on the release conditions. Getting the defects period and release trigger in writing is more valuable than shaving one point off the rate, because a specific date is what makes retention billable at a known time.
What if the defects period is running but the clause is vague?
Document what you have: the signed acceptance certificate with its date, and the clause wording. Send a written release request referencing both. A vague clause makes the request easier to ignore, but a documented request creates a starting point for escalation. If no response arrives, the follow-up is a formal demand letter.
What is the difference between a stage release and a final release?
Many Thai subcontracts split retention into two parts. Half is released on acceptance of the final stage, which you can invoice soon after the project closes. The other half waits for the end of the defects period. If your contract does not name both releases separately, ask before you sign which event triggers each one.
If you want a second opinion on a retention clause before you commit, the 45-minute call starts with the documents you have.