Are you getting your retention money?

Many construction contracts contain retention clauses but it is not always easy to recover the cash once the contract is complete. 

Retention clauses offer a form of security that the works carried out have been completed properly.  The retention monies may be deducted by the employer from amounts due to a contractor and by contractors on amounts due to sub-contractors. 

Retention monies are usually between 3% and 5% of the total value of the work.  Half is usually released on practical completion of the construction works, the remaining half is usually paid when the defect liability period has ended and all defects have been made good, or at the time of the final account payment.  The difficulty in obtaining payment tends to be with the second half of the retention monies.  This is because the date when the payment becomes due is often a long time after the works have been completed.  The defect liability period would be at least one year and if you are a sub-contractor involved in the early works, your works may be completed a year before practical completion.  We have seen several instances where retention monies are treated as discounts, especially by main contractors, who will often only pay up if they are presented with a claim.

Sub-contractors should be wary of this because retention monies can add up to significant amounts.  They are not always aware that if not paid on the due date, interest becomes payable.  If all matters with regard to the contract have been resolved, then it is unlikely that retention monies can be disputed.

If a simple request to the contractor does not meet with payment, then adjudication proceedings can be commenced.  However, court proceedings or insolvency proceedings, by way of the service of a statutory demand, can sometimes be more effective.  At Birkett Long we offer a fixed fee service for court proceedings and the service of statutory demands to recover retention monies.  Contact us if you would like assistance with collecting retention monies or to discuss when they may be due.