What is retention fund?

A retention fund is a portion of payment withheld by a client or project owner to ensure that a contractor or service provider completes their work satisfactorily and addresses any defects or issues that may arise after project completion. This fund is typically released after a specified period, often referred to as the retention period, which allows for any necessary corrections to be made. Retention funds are commonly used in construction and service contracts to protect the interests of the client while incentivizing the contractor to deliver quality work.