What is a retention in conveyancing?
A retention in conveyancing is a sum of money that is held back from the sale proceeds or purchase funds after completion. It is usually kept by a conveyancer or solicitor for a short period because there is an issue that has not yet been fully resolved, but the transaction still needs to go ahead. In simple terms, it acts as a financial safeguard.
Retentions are common in residential property transactions and can arise in both house purchases and sales. They are often used where there is uncertainty about a repair, service charge, completion of works, or an outstanding legal point. At RFB Legal, our residential property solicitors regularly deal with retentions as part of conveyancing for buyers, sellers, landlords, and property investors across England and Wales.
Why are retentions used?
A retention helps reduce risk where one party may otherwise be exposed to a loss after completion. It gives both sides a practical way to complete the transaction without delaying matters unnecessarily.
Common reasons for a retention in conveyancing include:
- Repairs or remedial works: Where a property needs work that has not been finished before completion.
- Leasehold issues: Where service charge accounts, ground rent, or building costs are not yet finalised.
- Absent information: Where a title, management pack, or completion certificate is still awaited.
- Boundary or access concerns: Where there is a possible dispute that may affect value or use of the property.
- Remortgaging or equity release: Where a lender requires money to be held back until a condition is satisfied.
For example, if a seller agrees to complete repairs after exchange but the work is not finished by completion, the buyer’s solicitor may seek a retention from the sale price to protect the buyer if the seller does not carry out the work properly.
How does a retention work?
The exact process depends on the transaction, but the basic idea is the same. A sum of money is held back on completion and released later once the agreed condition has been met.
Typically, the steps are:
- The issue is identified during conveyancing.
- The buyer’s solicitor, seller’s solicitor, or lender agrees that a retention is appropriate.
- The amount to be held is negotiated and documented.
- The transaction completes, but the retention is not released immediately.
- Once the issue is resolved, the retained funds are paid to the appropriate party.
For example, in a leasehold sale, part of the sale proceeds may be retained until the managing agent issues a final service charge receipt or confirms that no further charges are due. In a purchase, a retention may be held until the seller completes agreed roofing repairs and provides evidence of completion.
Who holds the retention?
Usually, the buyer’s or seller’s solicitor holds the retention in a client account, although in some cases a lender, developer, or managing agent may be involved. The arrangement should be set out clearly so everyone understands:
- the amount being retained;
- what condition must be met before release;
- the time frame for release;
- what happens if the condition is not met; and
- who decides whether the condition has been satisfied.
Clear wording is important. Without it, there is a greater risk of disagreement later about whether the money should be released.
What are the main types of retention in conveyancing?
Purchase retention
This is used where a buyer is concerned about a known issue with the property. It may be agreed where repairs are still outstanding or there is uncertainty about a specific cost. The retention protects the buyer if the seller does not complete the work as agreed.
Sale retention
This may be used where a seller wants to ensure that any future claims, deductions, or liabilities can be met. A common example is a leasehold sale where service charge or ground rent accounts are not yet finalised.
Leasehold retention
Leasehold properties often involve complex financial arrangements. A retention may be needed for apportionments, balancing charges, or estimated service charges. This is particularly common where the managing agent has not issued final figures before completion.
Remortgage retention
When remortgaging, a lender may agree to release funds subject to a condition, such as proof of insurance, completion of works, or regularisation of a title issue. The retained amount is then released once the condition is met.
How is a retention agreed?
A retention is not automatic. It must usually be negotiated between the parties or required by a lender. The terms should be recorded in the contract, transfer deed, completion statement, or a separate retention agreement.
Conveyancers will usually consider:
- whether the issue is real and measurable;
- the likely cost of resolving it;
- whether the transaction can proceed without delay;
- how long the money may need to be held; and
- whether the arrangement is fair to both sides.
At RFB Legal, our conveyancing team aims to resolve these issues in a practical way, helping transactions progress efficiently while protecting our clients’ interests.
Common risks and mistakes to avoid
Retentions can be helpful, but they can also create problems if they are not handled carefully.
Common issues include:
- Unclear terms: If the retention agreement is vague, the parties may disagree later about release.
- Overestimating or underestimating the amount: If too little is retained, the protection may be inadequate. If too much is retained, completion may be unfairly delayed or complicated.
- No deadline for release: Money can remain tied up for longer than expected if no time limit is agreed.
- Failure to document the trigger for release: It should be clear what evidence is needed, such as invoices, certificates, or confirmation from a managing agent.
- Ignoring lender requirements: If a mortgage is involved, the lender may have its own rules about retentions.
It is also important to remember that a retention is not a substitute for proper legal advice or a detailed property investigation. It is only one tool used to manage risk during a conveyancing transaction.
How long is a retention kept for?
This depends on the reason for the retention. Some are released within days or weeks after completion, while others may remain in place for months. For example, a retention for minor repairs may be released once the seller provides evidence of the work. A leasehold retention may need to stay in place until final accounts are prepared by the managing agent, which can take longer.
If the issue is not resolved within a reasonable period, the solicitor holding the retention may need to follow the terms of the agreement, seek further instructions, or in some cases obtain agreement from all relevant parties before release.
How can a conveyancer help?
A conveyancer or residential property solicitor can identify whether a retention is appropriate, negotiate the terms, and make sure the paperwork is clear and enforceable. This is especially important in more complex transactions such as leasehold purchases, buy-to-let investments, and properties affected by title or management issues.
A solicitor can help by:
- explaining whether a retention is likely to protect your position;
- negotiating the amount to be held back;
- ensuring the contract reflects the agreed terms;
- advising on lender requirements;
- checking the trigger for release is practical and clear; and
- reducing the risk of disputes after completion.
For buyers, this may mean peace of mind that money is available if work is not completed. For sellers, it can help avoid unnecessary delays and keep a transaction moving forward. For landlords and investors, it can provide a workable solution where service charge or repair issues need to be dealt with after completion.
What should you do if a retention is suggested?
If a retention is proposed during your residential conveyancing matter, do not assume it is a problem or a sign that the transaction will fail. In many cases, it is simply a practical way to move forward.
You should:
- ask your conveyancer why the retention is needed;
- check how much is being held and whether it is reasonable;
- confirm what must happen before the money is released;
- make sure the terms are written down clearly; and
- seek advice if you are unsure about the consequences.
If you are borrowing from a mortgage lender, your solicitor should also confirm whether the retention is acceptable to the lender and whether any additional conditions apply.
Frequently asked questions
Is a retention the same as a deposit?
No. A deposit is usually paid at exchange of contracts as part of the purchase price. A retention is money held back after completion to cover a specific issue.
Can a retention be refused?
Yes. A party may refuse a retention if they do not agree it is necessary or fair. In that case, the solicitors may need to negotiate further or look for another solution.
Who gets the money if the issue is not fixed?
That depends on the agreed terms. The retention agreement should say whether the funds are returned, paid to the buyer, paid to the seller, or used to meet the cost of the outstanding issue.
Do all conveyancing transactions involve retentions?
No. Many residential property transactions complete without any retention at all. They are used only where there is a particular issue that needs to be managed.
Speak to RFB Legal about your conveyancing matter
If you are buying, selling, remortgaging, or transferring equity and a retention has been raised, it is sensible to get clear advice early. The conveyancing team at RFB Legal can explain the position in plain English and help you understand the practical implications for your transaction. Every case is different, so advice should always be tailored to your own circumstances.
Whether your matter involves a leasehold flat, a family home, a buy-to-let property, or a more complex residential transaction, RFB Legal is here to provide responsive, expert support throughout the process.
Disclaimer: This article is provided for general information purposes only and does not constitute legal advice. The law may have changed since the date of publication, and the information contained in this article may not be applicable to your specific circumstances. You should not rely on this article as a substitute for obtaining legal advice tailored to your individual situation. No solicitor-client relationship is created by reading, accessing, or acting upon the information contained herein. Whilst Ronald Fletcher Baker LLP makes reasonable efforts to ensure that the information is accurate and up to date at the time of publication, no warranty, express or implied, is given as to its accuracy, completeness, or suitability. Ronald Fletcher Baker LLP accepts no responsibility or liability for any loss arising from reliance on the information contained in this article. If you require legal advice regarding your particular circumstances, please contact a qualified member of our team.”
