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Streetwise Answers

On one recent job the Main Contractors QS said that they did not have to release the first moiety of the retention they are holding on the subcontract works until they receive PC from the Client for their works.

I said this sounded unfair and was told that this is how it is.

Could you please confirm that the Main Contractor should release 50% of the retention held once the subcontractors work is completed satisfactorily. The remaining 50% to be released after the end of the "Defects Liability Period."

This is irrespective of whether the Main Contractor has PC on his whole works. Otherwise lets say a piling subcontractor on the Shard would have to wait a number of years to get his first 50% retention released until the Main Contractor finishes the whole building.

F Park QS



Hi Frank

Firstly, there is no one size fits all answer to this type of problem, and one of the common misconceptions is that all contracts are the same. Or that they are all subject to the kind of general rules that you suggest.

So, the first thing all Specialist Sub-Contractors need to be wary of, is that all contracts are different, and some are far more onerous than others!

That means that we can't fully answer your question without seeing the terms of the contract.

However, if the contract is subject to the Construction Act, and was formed after 1 October 2011, then making payment of the first moeity of retention conditional on achieving PC under the Main Contract does not constitute an "adequate payment mechanism" as per s110 of the Act. In which case the payment terms of the Scheme for Construction Contracts are implied into the contract.

As regards when the first and second moeities of retention are due, then you really do have to check the contract.

Because the revisions to the Construction Act (that became operable from 1 October 2011), do not permit payments to be linked to events or certificates in upstream contracts, then Contractors are finding all sorts of creative ways to avoid paying retention in accordance with the general principles which you suggest.

That being the case, we have seen contracts stating that retention will not be payable for 2 years!

So, the message to all Specialist contractors is; please watch out for onerous terms relating to retention, and do not accept them!

As always if anyone has a specific problem about which they need advice then please call on during office hours on 01773 715062.

 


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