Retention - Its not big and its not clever...
Back in 1964 Sir Harold Banwell wrote about collaborative working practices (long before Latham and Egan). He also urged that retention be gradually phased out. Forty-five years on and there seems to be no sign that this unhelpful and persistent stalwart is on its way out.
Back in 2010 I wrote about the problems surrounding the release of retention at the Westfield Development in London.
Retention is there to provide the employer with some peace of mind in the event that defects arise following the employer taking possession of the site. Unfortunately as is often the case, that leads to problems for the contractors in securing that final payment. The system is rife with tales of abuse.
Now for some good news. In a recent court case between a developer and a plumbing contractor (AMW Plumbing and Heating Limited v. Zoom Developments Limited) regarding the developers refusal to pay retention, Sheriff Principal Taylor decided that they should pay and found in favour of the specialist contractor.
The developer had argued that the works had not been fully completed. The site consisted of three blocks of flats and only two had been completed. The works to the first two blocks had been completed correctly and the developer didn’t contest this. The developer had then suspended works and couldn’t say when they intended to begin the third and final block.
One of the lynchpins of the Construction Act 1996 is that in every construction contract there must be an adequate mechanism for determining what payments become due and when and provide for a final date for payment.
The developer alone controlled when the works would proceed and be completed and therefore the contractor had no way of knowing when the retention monies would be paid.
The Sheriff ruled that the developers contract didn’t have an adequate mechanism. This meant that it fell back to the Scheme for Construction Contracts. Under this scheme your retention has to be paid 7 days after the completion of the works to which it relates or following the issue of a claim by the contractor (whichever is later).
The balance of the retention (normally the last 2.5%) has to be paid to the contractor by the final date for payment (17 days after the first 7 day period or 17 days after the contractor submitted their claim).
If you’re a contractor and are struggling to get your retention monies paid out give me a call to discuss. I can review you contract, advise you what your rights are and how to proceed.