Consultations on cash retentions and the Construction Act

This blog post looks at the recently announced Government consultations relating to the construction industry.

The Department for Business, Energy and Industrial Strategy has published a consultation on the law and practices in the use of retentions in the construction industry and also a consultation to review the implementation of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996).

The retention consultation takes into account the results of Pye Tait Consultancy's research, which identified a number of key issues including:

  • a large proportion of parties lost retention money due to contractor insolvency
  • some employers make payment of the retention conditional on the performance of obligations under another contract, despite the provisions of the Construction Act 1996 preventing conditional payment obligations, and
  • paying the retention late or not at all is a significant issue for some contractors, with the delays increasing further down the supply chain.

It also looks at alternatives like project bank accounts, escrow accounts, retention and performance bonds and retention deposit schemes.

The consultation on the implementation of the Construction Act 1996 considers:

  • the effectiveness of the 2011 changes to the Act
  • the effectiveness of the Act and its ongoing fitness for purpose, considering the payment framework introduced in 2011 and the use of adjudication to resolve disputes, and
  • the affordability of adjudication and whether the costs prevent parties from using it.

The closing date for both consultations is 19 January 2018.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.