Commercial Fit-Out Contract
Retention, LAD, Progress Claims & Defects Period (2026)

Why a fit-out contract is different from a home renovation

A homeowner's renovation contract is mostly about protecting a consumer from a contractor who disappears. A shop, office or restaurant fit-out has a different pressure: rent is running, the landlord's fit-out period is short, and every week the premises are not open is lost trade. The contract has to manage money and time between two businesses, often with a landlord, a building manager and a designer in the middle.

This guide is for the tenant or business owner signing the contract. It explains the clauses that decide who carries the risk. For the programme from lease to opening day, read ClickBina's commercial fit-out process guide; for what usually blows the budget, see the fit-out budget mistakes guide. Homeowners should start with the renovation contract guide instead. This page is general guidance, not legal advice; a lawyer should review a large contract.

The documents that make up the contract

A fit-out contract is rarely one document. It is a bundle, and the order of precedence matters when two parts disagree. A letter of award that says "as per quotation" with nothing attached is the weakest possible position for either side.

Formal construction projects often use a published standard form, such as the PAM forms used by architects, which already contain payment, retention and delay clauses. Smaller fit-outs usually run on a quotation plus the contractor's terms. Either can work, as long as the points below are written down.

Lump sum or remeasured: how the price is fixed

In a lump sum contract the contractor agrees to deliver the drawn and specified scope for a fixed price. You carry the risk of changing your mind; the contractor carries the risk of having under-measured. Lump sum suits a fit-out where the design is finished before the contract is signed.

In a remeasured contract the rates are fixed but the quantities are measured as the work is done, so the final sum moves with what is actually built. It suits work that cannot be measured in advance, such as repairs to an old shoplot where the condition behind the finishes is unknown.

Most fit-outs mix the two: a lump sum for the designed works plus provisional sums for items nobody can price yet, such as the landlord's required fire works or a signage design still in progress. Ask for every provisional sum to be listed with its amount, and for the contract to say it will be adjusted to the actual cost, up or down.

Progress claims and how they are checked

A fit-out is normally paid in stages through progress claims: the contractor submits a claim for the work done to date, someone checks it against the site, and you pay the certified amount less retention. The principle is the one ClickBina's renovation payment schedule guide sets out for homes: never pay far ahead of what is built.

On a commercial job the checker matters. If an architect, interior designer or quantity surveyor is appointed, the contract should say they certify each claim. If not, agree what evidence a claim needs: a breakdown against the itemised bill, a site walk, and materials delivered to site rather than ordered. The contract should also give a fixed number of days to respond to a claim and to pay, because silence on a claim is a common start of a dispute.

• Claims tied to milestones that can be seen on site: partitions up, ceiling closed, flooring laid, handover.
• Each claim shows the cumulative value, less previous payments and less retention.
• A written response if part of a claim is disputed, with the reason and the amount.
• No payment for materials that are only ordered unless they are delivered and owned by you.

Retention: what is held back and when it is released

Retention is a slice of every payment that you keep until the work is finished and the defects are put right. ClickBina's renovation contract guide notes a retention sum of 5–10% held until the end of the defects liability period. In commercial contracts it is common for half to be released at practical completion and the other half at the end of the defects period; write down which pattern you agreed.

Retention only works if the contract says when it is released and what triggers the release. A clause that says "retention released upon satisfaction" invites argument. Better: released within a stated number of days after the defects list is closed, signed off by the person who certifies claims. Some contractors offer a performance bond instead of retention on larger jobs; that is a separate document from a bank or insurer, and the contract should say which one applies.

Completion date, LAD and extension of time

Liquidated ascertained damages (LAD) are a pre-agreed amount the contractor pays for each day of delay past the completion date. ClickBina's renovation delay guide explains that Section 75 of the Contracts Act 1950 requires the amount to be reasonable, and suggests a daily rate such as RM100–RM500 per day depending on project size. For a shop, base the rate on a real figure: rent and the cost of a delayed opening, not a punishment.

LAD only bites if the completion date is clear and the extension of time (EOT) rules are fair. A contractor is normally entitled to more time for delays it did not cause: your late design decisions, variations, late landlord approvals, or access refused by the building. A good clause asks the contractor to give written notice of the delay promptly, with the reason, so an extension can be agreed at the time instead of argued about at the end.

Variations in a commercial fit-out

A variation is any change to the agreed scope: an extra partition, a different floor finish, more power points. On a fit-out they often come from the landlord or the building manager as well as from you. The rule is the same as in ClickBina's variation order guide: priced and approved in writing before the work is done, signed by the person the contract names.

The contract should say how variations are valued: at the bill rates where they apply, at a fair rate where they do not, and whether a variation also changes the completion date. Keep a running variation register so the final account has no surprises.

Practical completion and the defects period

Practical completion is the day the premises can be used for their purpose, with only minor items left. It usually starts three things at once: the defects period, the release of the first half of retention, and the end of LAD. Walk the unit with the contractor and record a snag list on that day; anything not on the list becomes harder to argue later.

The defects liability period is the time after handover during which the contractor must return and fix defects that appear. ClickBina's defects guide lists a typical period of 6–12 months. For a busy restaurant, agree how and when defects are fixed without closing the outlet, for example after trading hours, and how quickly urgent defects such as leaks are attended to.

The final account

The final account is the agreed total at the end: the contract sum, plus or minus variations, plus or minus the adjustment of provisional sums, less LAD if any, less payments already made. It closes the money side of the job. Ask for it to be prepared soon after practical completion, while everyone still remembers what happened, and keep the variation register and site records to support it.

Do not let the final account drift until the end of the defects period. The longer it waits, the more likely it ends in a dispute about items no one can now check.

When payment is disputed: CIPAA adjudication

For construction contracts in Malaysia, unpaid claims can go to statutory adjudication. The Asian International Arbitration Centre (AIAC) explains that the Construction Industry Payment and Adjudication Act 2012 (CIPAA) came into operation on 15 April 2014 and provides a cheaper and speedier route for payment disputes. The unpaid party serves a payment claim; the other party has 10 working days to serve a payment response saying how much is admitted or disputed and why.

The adjudicator's decision binds both parties until the dispute is finally settled by arbitration, court or agreement. For a tenant, the practical lesson is simple: answer every progress claim in writing and on time, stating the amount you dispute and the reason. A claim ignored is a claim that is hard to defend later.

Contract checklist and typical figures

These are the figures ClickBina's guides publish for the clauses above and for the fit-out itself (indicative 2026, Klang Valley). Use them to sense-check a contract, not as a quotation.

Before signing, check that each of these is in writing:

1. Drawings, specification and an itemised bill attached, with provisional sums and exclusions listed.
2. Who certifies progress claims, what evidence a claim needs, and how many days to respond and to pay.
3. Retention percentage, the release trigger and the release timing.
4. A completion date, the LAD rate and the extension-of-time rules, including landlord and building delays.
5. The variation procedure and how variations are valued.
6. The defects period, the response time for urgent defects, and when the final account is prepared.

How ClickBina can help

ClickBina is an experienced KL & Selangor contractor for commercial renovation and trade coordination. Every quotation is itemised so it can be attached to the contract, and the scope, payment stages and handover are agreed in writing before work starts. WhatsApp us your job details for a quote: the area, the type and size of the premises, what the landlord hands over, and your target opening date. We reply within the hour, and the price we agree is a flat price with no hidden charges.

Sources & methodology

• ClickBina renovation contract, payment schedule, delay claim, variation order and defects guides — retention, LAD, Section 75 and defects period figures.
• ClickBina retail, restaurant and office fit-out cost guides — fit-out rates per sq ft.
• Asian International Arbitration Centre — CIPAA adjudication overview and procedure.

How we estimated prices: every RM figure on this page is quoted unchanged from the ClickBina guides named above; they are indicative Klang Valley ranges for 2026. This page is general guidance, not legal advice.