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a consultation process on retentions in the construction industry, and on the 2011 amendments to the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996), Francis Ho, partner at Penningtons Manches, considers the possible changes that
could be made to the law around retentions, payment and adjudication.
First published on LexisPSL Construction. Click here for a free trial.
The retentions consultation followed detailed research commissioned by BEIS in England into businesses’ experiences with cash retentions, their disadvantages and possible alternatives. Cash retentions have long been a prickly issue within
the construction industry. Clients and main (Tier 1) contractors typically hold back 3–5% in retention from any payments due to their own contractors, primarily to incentivise them to remedy any defects in construction works that come
to light during the defects liability period. Half of this sum is usually returned to contractors at practical completion, with the remainder being paid at the end of the defects liability period (generally lasting for 12–24 months),
subject to any set-offs the payer is permitted to make.
These retained funds can be abused, with those holding them either releasing them late or even not at all.
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