A punch list holdback is the portion of a contractor's final payment that an owner or general contractor withholds until every item on the punch list, the record of minor defects and unfinished work noted at Substantial Completion, has been fixed. It gives the owner a direct financial reason to get the last few items closed out rather than letting them drift once the crew has moved on to the next job. On UK, Irish, Australian and New Zealand projects the same list is usually called a snag list, and the money held against it falls under the general term Retention.
A Worked Example
A Subcontract is worth $500,000, and the final Payment Application comes to $45,000. At the closeout walkthrough, the punch list has 12 outstanding items: touch-up paint, a missing door closer, three light fixtures, and some caulking. As an illustrative example, the general contractor holds back 2% of the subcontract value, $10,000, from that final payment, releasing $35,000 now and the remaining $10,000 once a follow-up walkthrough confirms the list is clear.
A punch list holdback differs from retention in scope. Retention is held back a little from every payment across the whole contract, while a punch list holdback is usually a one-time amount tied to the final payment and the specific items found at the closeout walkthrough.
Punch List Holdback on the Cost Report
The holdback sits as a liability against the subcontract in commitments and liabilities, separate from any retention held across the whole contract, and it only clears once the punch list is marked complete and the Final Account is agreed. Until then, the cost report should show the subcontract as not fully paid out, even though the bulk of the work is done.
Related Terms
Punch list holdback is related to Substantial Completion, Retention, Defect Liability Period, and Final Account.
FAQ
How much is typically held back for punch list items?
Amounts vary by contract, but a small percentage of the remaining contract value is common until the list is cleared, with the exact figure set out in the subcontract itself.
When is a punch list holdback released?
Once the contractor has closed out every item on the list and the owner or their representative has signed off on a follow-up walkthrough.
Who decides what goes on the punch list?
Usually the owner, the Architect, or the owner's representative walks the site with the contractor and agrees the list together, so both sides are working from the same record of what is left to finish.