Retentions in Conveyancing, When Buyers Hold Back Money After Completion

What is a Conveyancing Retention?

A retention is an arrangement whereby a buyer's solicitor holds back a portion of the purchase price after completion, pending resolution of a specific issue identified during the conveyancing process. Rather than allowing the issue to delay or collapse the sale entirely, both parties agree to complete, with the retained sum held in the buyer's solicitor's client account until a defined condition is met.

Retentions are a pragmatic tool when both parties want to proceed with the transaction but a known issue cannot be fully resolved before the agreed completion date.

Common Reasons for a Retention

1. Structural or Physical Defects

The most straightforward trigger for a retention is a physical defect identified in the buyer's survey, a roof in need of repair, evidence of damp, a defective chimney stack, or failing guttering. If the seller is unwilling or unable to carry out the works before completion, the buyer may agree to proceed on the basis that a sum sufficient to cover the estimated cost of repair is retained.

The retained amount is typically calculated from the surveyor's estimate, with a small uplift to account for contingency. A roof replacement quoted at £8,000 might result in a retention of £10,000.

2. Leasehold Service Charges, the Most Common Trigger

In leasehold transactions, a retention is almost routinely requested where the management pack reveals outstanding or anticipated major works. There are two specific scenarios:

**Unspent service charge reserve:** Where the seller has contributed to a sinking fund or reserve fund, the buyer's solicitor may retain an amount equivalent to the seller's share of the fund, arguing that the seller should account for the contributions already made.

**Major works notice:** If a Section 20 major works notice has been issued (giving leaseholders notice of significant building works), or if works are known to be imminent but the final cost is not yet confirmed, the buyer will almost always seek a retention to cover their potential liability once they take ownership. In this scenario, a retention of several thousand pounds, or even tens of thousands, is not unusual.

3. Planning or Building Regulations Issues

Where a property has been extended or altered without the required planning permission or building regulations approval, and indemnity insurance is not available or acceptable to the lender, a retention may be agreed to cover the potential cost of rectification or enforcement action.

4. Pending Probate or Legal Matters

Occasionally a retention is used where a title issue, such as a missing beneficiary to an estate or an unresolved boundary dispute, cannot be fully resolved before completion. The retention gives the buyer financial protection while the matter is dealt with post-completion.

How Much is Typically Retained?

There is no fixed rule, but retentions are generally:

Where is the Retention Held?

The retained sum is held in the buyer's solicitor's client account, a separately designated, ring-fenced account that solicitors are required by law to maintain for client funds. The money cannot be used for any other purpose and must earn interest at a commercially reasonable rate. Interest typically accrues in favour of the buyer unless the contract specifies otherwise.

The retention is not paid over to you, the seller, until the release conditions are satisfied. This means you may complete on your sale but receive less than the full purchase price on the day.

Release Conditions

The contract will set out the precise conditions that must be met before the retention is released. Common release conditions include:

• **Completion of specified works**, the contractor's invoice and a sign-off from a surveyor or building inspector confirming the works are done to the required standard
• **Passage of time**, for planning-related retentions, release may be triggered by the expiry of the enforcement period (typically 4 years for operational development, 10 years for change of use)
• **Resolution of the leasehold matter**, confirmation from the managing agent that the major works are complete and the final cost is known, with any overage or underpayment settled between the parties

Both solicitors will agree the release mechanism in advance. In most cases, once the condition is met, the buyer's solicitor releases the funds to your solicitor within a few working days.

Disputes Over Release

Problems arise when the parties disagree about whether the release condition has been met, most commonly in leasehold transactions where the final cost of major works turns out to be higher than anticipated, or where the seller believes the works are satisfactorily complete but the buyer disputes the quality.

If a dispute arises:

1. **Negotiate directly** through solicitors first, this resolves the majority of cases

2. **Commission an independent surveyor's report** to determine whether works meet the required standard

3. **Apply to court** if the retention is large enough to justify litigation, though this is rare and costly for all parties

The risk of a retention dispute is one reason why sellers should ensure all known issues with a property are identified, documented, and resolved, or at least accurately disclosed, before marketing. A well-maintained property record on Property Passport UK, showing completed works, guarantees, and certificates, significantly reduces the likelihood of a retention being demanded in the first place.

Tips for Sellers Facing a Retention Request

• **Do not automatically accept the buyer's proposed figure**, instruct your solicitor to negotiate, particularly where the estimate is based on a worst-case scenario
• **Carry out the works before completion if possible**, this removes the need for a retention entirely and may cost less than the inflated retention sum
• **Agree a clear release mechanism upfront**, vague release conditions lead to disputes; ensure the contract specifies exactly what evidence is required for release
• **Set a longstop date**, insist on a clause that if the release condition is not triggered within a defined period (say, 12 months), the retention reverts to you automatically