Retentions and securities
A common feature of many commercial contracts is the inclusion of a retention or security provision to address possible defects in the building work.
There are new legislative requirements relating to retentions and securities and imposing a default statutory defects liability period.
A building contract may allow for a retention amount or security to be withheld to address any potential defects appear in the building work both:
- during construction
- after practical completion.
The legislation limits the amount that can be withheld.
If a building contract does not specify a defects liability period then any retention amounts or security held must be released 12 months after practical completion. It is now an offence to not release retention amounts without reasonable excuse.
Notice of end of defects liability period
There is a requirement that contractors advise subcontractors of the impending end of the defects liability period by giving them a:
This notice must be given within either:
- 10 business days before the end of the defects liability period
- 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.
It is an offence to fail to provide this form.
If you are unsure of your contractual rights or obligations you should obtain legal advice from a solicitor with experience in building contracts.