Liability Period and retentions – head contractor and subcontractor responsibilities

From 17 December 2018, new requirements apply to the retentions, security and a statutory defects liability period. 

If under a building contract: 

  • a retention amount may be withheld; or 
  • a security may be held after practical completion for the rectification of any defects in the building work 

Any retention amounts or security must be released 12 months after practical completion if the contract does not specify the defects liability period. 

Also, there is a new requirement that contractors need to give a Notice of End of Defects Liability Form to subcontractors advising of the impending end of the defects liability period. Non-compliance is an offence. 

This notice must be given within 10 business days before the end of the defects liability period or within 5 business days after receiving a notice if the defect liability period is linked to another building contract. This requirement does not apply to a contracting party who enters into a building contract as a principal.

Flow chart for retentions and defects

Releasing retentions

It is now an offence to withhold a subcontractor’s retention money without a reasonable excuse. There is a maximum penalty of 200 units or one year’s imprisonment.