WHAT IS RETENTION ?

RETENTION IS THE TEMPORARY WITHHOLDING OF CERTIFIED PAYMENTS ON CONSTRUCTION PROJECTS IN ORDER TO GUARANTEE PERFORMANCE.

DEPENDING OF THE FORM OF CONTRACT SIGNED, RETENTION TYPICALLY RANGES FROM 2% TO A MAXIMUM OF 10% OF THE CONTRACT VALUE.

HALF OF THE RETENTION WITHHELD SHOULD BE RELEASED UPON ISSUE OF A COMPLETION CERTIFICATE BY THE ARCHITECT. THIS IS KNOWN AS THE 1ST MOIETY RELEASE OF RETENTION.

THE BALANCE OF RETENTION SHOULD BE RELEASED TYPICALLY BETWEEN 6 AND 24 MONTHS AFTER COMPLETION UPON ISSUE OF A FINAL CERTIFICATE BY THE ARCHITECT. THIS IS KNOWN AS THE 2ND MOIETY RELEASE.

The use of retention on construction projects is supported by the beneficiary (client) as it aids their cashflow. However there are a number of disadvantages for the debtor (contractor) when the agreed procedures are not adhered to.

How Does RETENTION
Impact On your Business?

Retention has an adverse effect on the Cashflow of the debtor (contractor).

Retention is often incorrectly applied to early trades on projects which often results in the retention period exceeding 12 months.

Retention is often incorrectly withheld on Labour only contracts.

Retention is often not released at the 1st Moiety Stage (Project Completion)

Retention is often not released at the 2nd Moiety Stage
(After Defects Period)

THE INTRODUCTION OF THE CONSTRUCTION CONTRACTS ACT 2013,

 BRINGS WITH IT A KEY CONSIDERATION THAT DETERMINES “PAY WHEN PAID” PROVISIONS ARE NO LONGER PERMITTED.


CONTACT US TODAY IF YOU HAVE EXPERIENCED ANY OF THE ABOVE.