Jonathan Hyndman, Partner at Rosling King, a UK based law firm, wrote a report on the current status of retentions. Cash retentions are very common in the construction industry, with approximately £3 billion of outstanding retentions in the UK at any one time. Developers enjoy having an element of protection against faults arising during the rectification period and late completion given by the deduction and the retention of a percentage of the value of the works from interim payments due to the contractor during the construction phase. Contractors have been encouraged to price the risk of their retention not being released into the contract sum because of the persistent failures to release them on time and sometimes at all as a result of simple breach of contract or the insolvency of the party holding the retention. The Construction (Retention Deposit Schemes) Bill, introduced as a Private Members’ Bill, was read on the 9th of January in the House of Commons for the first time, following the Carillion’s collapse which brought into perspective the importance of the proposed legislation. What Bill will do is it will introduce a secondary legislation that requires cash retentions to be paid into a Government approved scheme. This means that even though the party to whom the retention is due would still be encouraged to complete work on time and to fix defects, in the event of the retention holder’s insolvency, the retention would be in a Government approved scheme and would be available for downstream release before any creditor distribution. The construction industry has showed its support for the proposal, which is needed in relation to deposits paid by tenants of shorthold tenancies to landlords for example. However, for Carillion’s subcontractors and suppliers, this protection of retentions against upstream insolvency in the construction industry will come too late.

The inclusion of deleterious or prohibited material clauses for building contracts and professional appointment documents is common throughout the construction industry. While it is thought that these types of clauses will differ slightly from contract to contract, the common intention behind all of them is to prohibit the use of unsuitable or dangerous materials during construction projects. Partner at Rosling King LLP, Jonathan Hyndman has been exploring the central legal issues that construction contract parties must consider when negotiating what provisions are being made for prohibited materials. Deleterious material is defined as those which are capable of causing damage or harm to an individual, the environment or to buildings and infrastructure. While there is legislation in place to limit or prevent the use of known hazardous materials, it is inevitable that is legislation will require addition as more deleterious materials are identified. In some cases, when the material is used, it is not known to be problematic and it is only later that more harmful effects become known to us. An example of this is the fatal use of asbestos in building projects and the use of polyethylene cores in cladding products. Concern over a material’s suitability or reliability can also be cause to warrant its prohibition on a project. Therefore, it is vital that developers, consultants and contractors consider the specific circumstances of the individual project while exploring and negotiating the scope of the obligation not to specify or use prohibited materials. When it comes to the law it is vital that, when negotiating a contract, the extent of the definition of prohibited materials in the construction contract is considered. At the moment there is no standardised industry form and contracting parties are free to be as broad or as narrow as they see fit when drawing up a contract, with due regard to the nature and circumstances of the project.