Contractor's Retention Money Not Released After Handover in Thailand: What to Prove and How to Recover It

The core answer

You finished the job, the employer accepted it, and months later the retention (the "เงินประกันผลงาน") is still held. In most cases this is a contract question first and a Code question second. The contract decides how much was held, why, and on what date it should come back. The Code fills the gaps.

The rule (Civil and Commercial Code). Under section 602 the fee is payable when the employer accepts the work. Under section 599 the employer may withhold the fee if delivery was late or the work was defective, unless the contractor gives reasonable security. Under section 600, unless the contract says otherwise, the contractor answers for defects that appear within one year of delivery, or five years for a permanent structure built on land (a wooden house excluded).

Our practical view. Winning back retention usually turns on three documents: the clause that says when it is released, proof the work was accepted, and a record showing no defect was reported in the liability period. Gather these before you write a demand. A demand that quotes the clause, the acceptance date and the expiry date is much harder to ignore.

This guide is for the contractor after handover. If you are an owner reviewing a contract before signing, or you are chasing an ordinary unpaid invoice, read customers not paying for goods and services and debt collection, suing and enforcement.

1. What is retention money, and what is a performance guarantee?

These terms are used loosely. Check which one your contract means.

The Code does not set a retention percentage or a release date. These come from your contract and any attached terms. Read the payment clause, the handover clause and the defects clause together. If the contract is silent or only verbal, see whether verbal agreements are enforceable.

2. What proves the employer accepted the work?

Acceptance matters because it starts the payment obligation (section 602) and starts the liability period (section 600 counts from delivery). It also helps on defects: under sections 597 and 598, if the employer accepted the work without objection, the contractor is generally not liable for late delivery or for defects the employer could have seen. The exception is a defect that could not have been found when the work was received, or one the contractor concealed (section 598).

Useful evidence, best first:

• A signed acceptance certificate (ใบตรวจรับงาน) or handover minutes with a date.
• A final-payment or completion certificate from the owner's engineer or supervisor.
• A signed punch list showing items completed.
• Emails, LINE messages or photos showing the owner moved in or began using the work.
• A tax invoice for the final instalment that the employer accepted without comment.

Acceptance can be shown by conduct as well as in writing (section 598 says "expressly or impliedly"). Still, a signed paper beats an argument about conduct. Keep dated copies.

3. When may the employer deduct for defects, and what must they show?

Section 599 lets the employer withhold the fee if delivery was late or the work was defective, unless the contractor provides reasonable security. That is a right to hold back, not a right to keep the money for any reason.

In practice the employer should be able to show:

1. A real defect. A specific item, with photos, an inspection report or an engineer's note, not a general complaint.
2. Timing. It appeared within the liability period. The default is one year from delivery, or five years for a permanent structure on land other than a wooden house, but the contract can change both (section 600).
3. Notice to you. A written report during the period, so you could inspect or repair.
4. A reasonable amount. A deduction that matches the cost of fixing the defect, not the whole retention for a small snag.

If the contract allows you to repair first, offer to do so in writing. A refusal to let you repair, followed by a deduction for the repair, is a weak position for the employer.

Our practical view: if the employer raises defects only after you demand payment, or never raised them during the period, record that fact. The employer's own timing weakens the claim.

4. How long is the defect liability period, and when does it end?

Section 600 starts from delivery (วันส่งมอบ). That is why the handover date matters. Many contracts instead release retention at the end of the period in the contract, for example 12 months after the final acceptance certificate. Follow the contract date.

5. How long do I have to claim the retention?

Prescription is the trap. We checked the text of the Code and it gives several possible periods.

• Two years (section 193/34 (1)). Applies to a trader, industrialist, craftsperson or skilled tradesperson claiming the price of goods delivered or the fee for work done, except where the work was done for the debtor's own business.
• Five years (sections 193/33 (5) and 193/34 (1)). For those same claims where the work was done for the debtor's own business.
• Ten years (section 193/30). The general period where no special period applies.

Time runs from the day you could first enforce the right (section 193/12). For retention, that is usually the release date in the contract. A suit that you file, or a written acknowledgement from the debtor (including part payment or a request to pay later), interrupts the period under section 193/14.

Whether a contractor's retention falls under the two-year rule depends on how the contractor is classified and how the claim is framed. We found no rule that settles it for every case, so we do not say that the longer period applies. Our practical view: assume two years from the release date, and do not wait.

6. What interest can I add?

The rule. Section 224, as amended in 2021, sets default interest on a money debt at the section 7 rate plus 2 percent a year. Section 7 is currently 3 percent, so default interest is 5 percent a year. If the contract states a higher lawful rate, that rate stands. Section 224/1 limits default interest on an instalment debt to the instalment that was missed. The amended rate applies to default periods after the decree took effect, not to earlier periods.

When default begins (sections 203 and 204). If the contract fixes a due date by the calendar and it passes, the employer is in default without a reminder. If no due date was fixed, you can demand payment at once (section 203), and default starts when a demand has been given and payment is still not made (section 204). This is why a written demand has a legal purpose beyond politeness.

Hypothetical example. A contractor is owed 500,000 baht in retention, due on 1 March, with no interest term. Late by one year, the default interest at 5 percent is about 25,000 baht. The figure is illustrative only. It is not a prediction of what a court will award.

7. Cash retention or bank guarantee: does it change my position?

• Cash retention. The employer holds your money. You have an ordinary money claim against the employer.
• Bank guarantee. The employer holds a document. Your task is to get it returned or released when the period ends, and to make sure it was not called. If it was called, ask the employer for the call notice and the reason, then ask the bank for its position. The bank's obligations are set by the guarantee wording, so read it.
• Swap. Section 599 refers to "reasonable security". Many contracts let you replace cash retention with a guarantee. If yours does, and the employer refused a reasonable guarantee, that is useful evidence.

8. Demand, negotiation and deciding whether to sue

Work through these steps in order.

1. Check the contract. Find the release clause, the defects clause, notice rules and any dispute procedure.
2. Assemble the file. Acceptance papers, payment records, the retention calculation, correspondence about defects, and the end date of the period.
3. Send a written demand (หนังสือทวงถาม). State the amount, the clause, the acceptance and expiry dates, and a deadline, usually 7 to 15 days. Send it by registered mail with return receipt to the address in the contract and keep proof of delivery. Our demand letter service and legal notice service cover this.
4. Negotiate. Employers often respond to a specific list. Be ready for a partial release plus a repair or a cash offset. Write down any deal and have both sides sign. Never accept an oral promise.
5. Assess the claim. Compare the amount, the evidence, the employer's likely defects and the cost and time of litigation. See how long a civil case takes.
6. File a civil claim if the demand fails and time is running. See debt collection, suing and enforcement for the court steps. Check any arbitration or mediation clause in the contract first.

If the employer is a government agency, procurement rules may apply and the release process can differ. Check the terms of the specific contract.

9. Checklist

• Contract, annexes and variation orders located
• Release date and condition for the retention identified
• Signed acceptance or handover record found
• End date of the defect liability period calculated
• Payment history and retention total reconciled
• All defect reports, replies and repairs listed with dates
• Guarantee details noted (issuer, amount, expiry, whether called)
• Limitation date diarised, assuming two years
• Demand letter sent and proof of delivery kept
• Settlement, if any, in writing and signed

Further reading

• Customers not paying for goods and services
• Debt collection, suing and enforcement
• Is a verbal agreement enforceable?
• Software development contract and acceptance
• How long a civil case takes

Retention is recovered by the contract clause, the acceptance record and the limitation date, so collect those first and send a written demand without waiting.

We help contractors and business owners prepare demand letters and assess retention claims. Initial consultation is free — call +66 92 254 2045 or send us the details. See also demand letters, legal notices, contracts and documents and our civil litigation practice.

This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.