Claiming Retention Money after Construction
Retention Money is an assurance for the principal contractor that you will do your job well and right on time. If you do it right, then you deserve to claim it as part of your full payment.
If you want to enforce your right on retention money, book a consultation with Contracts Specialist. With the right advice, you can get fully paid stress-free. The first consult is free too.
Basically, retention in construction is the act of holding off an amount of money until the construction project gets completed. This ‘retained’ money serves as a security that the subcontractor will do their job well and on schedule.
This also safeguards the principal contractor from paying extra for delays and defects. Time frames apply on the exact time when could a subcontractor claimed this retained money. Usually, this money can be claimed after the actual building’s completion and/or after the defects liability period.
But, if they are giving you a bad time in getting this money back, then you can file for adjudication. As mandated by law, the money retention can also happen while undergoing adjudication. This can happen when you have filed for adjudication and would receive the money as an adjudicated amount.
Retention Clause in Contracts
The retention clause in a contract describes the amount of money to be retained. It also describes when and how will this amount be paid back, as agreed by both parties. The percentage of retention money withheld could be different from a contract to contract.
How much can a principal hold as Retention Money?
A usual construction contract will have 5% of the contract’s value as the amount of retention money. It can also be a 10% deduction for the payment you have recieved each progress payment. The amount of retention money should also reflect on your payment invoice.
Remember: The percentages will still vary depending what you have agreed in the contract regarding retentions.
But, for construction projects valuing over $20 million, the retention money should be put in a trust fund. The head contractor is responsible for maintaining the trust fund and is obligated to give out annual account statements to Fair Trading.
The head contractor is also responsible for withdrawing money to the trust fund as agreed in the contract. Meaning, what you and the head contractor agreed on the retention clause will stand in terms of getting these funds.
Rights with Retention Money
Given the retention clause, you have the right to:
- Issuing a payment claim for the retention money;
- Avoid ‘no pay when paid’ contract provisions and;
- Enforce your rights on retention money.
You have all the right to claim retention money especially when you did your part in the construction process. Do not forget to include the retention amount in your payment claim. It is your right to get paid as a subcontractor especially when they signed a subcontract statement.
The law also now prohibits the ‘no pay when paid’ contract clause. Even though you have been paid for your work, they are still obligated to pay back the retention money. Since, they may still have owe you a retention money that should be paid during the defects liability period.
So if you trouble getting this retention money back, you should enforce your right and make the principal contractor responsible. You have all the right to take it an adjudicator. You have did your part as promised, and you should be equally compensated for it.
Why hold retention money?
Principal contractors need to retain money so that they can be protected in situations where their subcontractors just runs off. They should withhold it as prescribed in the retention contract clause or through a payment withholding request during adjudication.
But, they should not hold this money forever. A subbie deserves to be paid with the retention money when it is due for any of the following reasons:
- There is an ongoing adjudication application but it becomes withdrawn;
- The payment claim has been paid as a response;
- The payment dispute is being resolved through debt recovery instead of adjudication and;
- 20 business days has lapsed since the adjudication application has been processed.
These reasons applies for retention money that came from applying for adjudication. For other scenarios to pay a subcontractor back, look over at your contract clause on retention again.
Claiming Retention Money
Usually, you can include the amount of the retention money the principal contractor when issuing a payment claim. Make sure that the principal contractor takes responsibility in paying you as stated in the subcontract statement.
Then, you can follow the prescribed time frames in the contract after issuing the payment claim. If they pay you within the payment schedule, then you are good. But if they don’t, take it to adjudication.
Yet, take note that withholding money can just start happening during adjudication. But whatever the situation you have regarding retention money, you are sure to claim it after going through the process. If you still do not get paid, then you can still recover it in court as debt.
We can also help you look over your contract. We can give you expert legal advice if a retention clause is necessary for your project, preventing further payment issues.
The road to getting paid stress-free starts with a legal consultation.
The first one is FREE.