How Retention Bonds Work
The three-party arrangement
A TGS retention bond is a three-party commercial surety undertaking between:
- The Contractor (Principal) — the subcontractor whose retention is being released
- The Beneficiary (Head Contractor or Principal) — the party who held the retention and who the bond protects
- TGS — the surety, who issues the bond undertaking to the Beneficiary
What the bond does
The bond allows the Contractor to recover retention monies held under a construction contract before practical completion. The Beneficiary accepts the bond in lieu of cash retention, retaining the right to call on TGS if the Contractor fails to meet their contractual obligations.
What triggers a bond call
The Beneficiary may present a demand to TGS if the Contractor fails to rectify defects, abandons the works, or otherwise breaches their contractual obligations as defined in the bond instrument. TGS will assess the demand and, if valid, pay the Beneficiary up to the face value of the bond.
The reimbursement obligation
This is critical: a bond call does not extinguish the Contractor's liability. If TGS pays a demand, the Contractor is obligated to reimburse TGS in full, including any costs. This obligation is secured by director personal indemnities and, where applicable, property-backed security provided at the time of application.
See the Consequences and Obligations page for a full explanation of your obligations before applying.
The application process
- Apply directly online, or contact your authorised broker if you have one
- If applying through a broker, they submit an application package to TGS on your behalf
- TGS assesses the application — creditworthiness, security, and project details
- If approved, TGS issues a Terms Letter
- You accept the terms and pay the bond fee
- TGS executes the bond instrument and issues it to the Beneficiary
Bond fee
TGS charges a bond fee based on the face value of the bond, the contractor's credit profile, and the term of the bond. You will receive a fee indication during the application process (via your broker, if you are applying through one). The bond fee is not refundable once the bond is issued.