In this section:
- Online Payment Pack Home
- Late or non payment
- Reduced or under payment
- Proposed price reductions
- Variation payment procedures
- Outstanding retention
- Retention not received
- Next steps
- Retention is not released
- All efforts have failed
- How to get it right next time
- Investigate alternatives to cash retentions
- Check your contract
- Check whether the OGC Fair Payment Charter applies
- Chase before your retention becomes due
Outstanding retention
Retention not received
If you have not received your retention on the date that it is due, send letter 5a - Outstanding retention to the contractor requesting its immediate release.
If you don’t know the date it was due, it is still worth writing to the contractor but you may also wish to contact the project client or his contract administrator (e.g. architect or quantity surveyor) to find out if the Certificate of Making Good Defects has been issued and the retention released to the contractor. Don’t confuse the Certificate of Making Good Defects with the Final Certificate: the Final Certificate is a completely different document and you do not need to wait for it to be issued in order to receive your retention.
Don’t forget that most standard contracts including DOM 1 and 2, JCT and NEC allow for 50% of the retention to be released on Practical Completion of the sub-contract (i.e. your) works and the following steps can also be used to recover these sums.
Letter
5a - Outstanding retention
Next steps
Retention is not released
If you do not receive a response and payment of your retention is not forthcoming, you can try:
- Writing formally to the client to tell him that you haven’t been paid your retention.
- Continuing to write to the contractor every month, claiming interest on the outstanding sum if you believe that it is overdue.
- Making a nuisance of yourself – it is your money and you are entitled to it!
All efforts have failed
If all other efforts fail, you can refer the issue to adjudication. In order to embark upon adjudication, there must be a ‘dispute’ which for an outstanding retention would usually mean that you have been unable to reach agreement on one or more of the following:
- The date, or event, upon which retention is to be paid to you
- Whether that event has occurred
- Whether you have made good the defects under the sub-contract
- Whether the contractor is adequately progressing the making good of his own defects
- Whether, in circumstances where the contractor is in dispute with the client that there are defects in the main contract works, the contractor is actively pursuing his rights under the main contract to have that dispute decided.
How to get it right next time
1. Investigate alternatives to cash retentions
Before agreeing to cash retention on a project, explore whether the contractor would be willing to accept an alternative such as:
- Retention bond – NSCC Specialist Contractors have access to guaranteed retention bonds courtesy of NSCC’s partnership with HCC International Insurance Company plc; for details, call HCC International on 0870 066 6903 or download an application form.
- Defects rectification period – Issue letter 5b - Defects rectification period offering a defects rectification period during which you will return to remedy any defects that appear in your works.
- Parent Company Guarantee – If you have a parent company, enquire whether it would be willing to guarantee that your works will be completed and any defects put right in the event that you do not perform.
Letter
5b - Defects rectification period
2. Check your contract
- Agree a date for release – If you can’t agree an alternative to cash retention, make sure you agree calendar dates for the release of your retention (including the first 50% when you complete your works as opposed to when the main contract works are completed) and write it into your contract using the following wording.
Provided that any defects in the sub-contract works, which have been notified in writing by the contractor to the sub-contractor prior to <insert date>, have been rectified and, notwithstanding any other provision of this agreement, it is agreed that any retention held under this agreement shall become due and payable to the sub-contractor on <insert date>.
- Secure automatic release – Ensure your retention becomes due for release automatically on the expiry of the rectification period under the main contract by incorporating the following wording into your contract.
Subject to there being no defects in the sub-contract works or such works in a section on the date of the expiry of the rectification period of the main contract for the main contract works or relevant section, the balance of any retention deducted and retained by the contractor shall be included in the next interim payment following the expiry of the applicable rectification period.
If there are any defects in the sub-contract works or such works in a section on the date of the expiry of the rectification period of the main contract for the main contract works or relevant section, such defects shall be stated in a list issued by the contractor to the sub-contractor. The balance of any retention deducted and retained by the contractor shall be included in the next interim payment following the making good of all such defects on such date as may be agreed (which agreed date shall be confirmed in writing by the contractor to the sub-contractor) or as may be determined by adjudication or, in the absence of such agreement of determination, following the issue of the notice of completion of making good defects under the main contract for the main contract works or relevant section.
3. Check whether the OGC Fair Payment Charter applies
From 1 January 2008, all clients in the public sector in England and Wales are expected to comply with the requirements of the Office of Government Commerce (OGC) Fair Payment Charter on their projects. The Charter provides that retentions should be replicated on the same contract terms throughout the supply chain, which means that the contractor cannot withhold from you more in retention than the client is withholding from him. If you are working on a project funded by central or local Government, always check the rate of retention in the contract documentation during pre-contract negotiations.
Even if it is not a public sector project and the Fair Payment Charter doesn’t apply, always try to avoid accepting a retention percentage greater than that which applies to the main contract.
Please note that the Fair Payment Charter does not apply in Scotland.
Find out whether it applies to one of your projects by submitting an NSCC enquiry form .
4. Chase before your retention becomes overdue
If you have agreed the dates on which your retention should be released, send letter 5c - Retention reminder to the contractor a couple of weeks prior to this to remind the contractor that it will shortly be due for payment.
You should also make sure you notify the contractor in writing that you have achieved Practical Completion if your contract requires you to do so.