Retention held in trust fund - Revision history

Designing Buildings at 07:55, 11 December 2020

2020-12-11T07:55:53Z

← Older revision		Revision as of 07:55, 11 December 2020
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	* The problems with retention.		* The problems with retention.

−	[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]

Editor at 16:59, 15 August 2018

2018-08-15T16:59:43Z

← Older revision		Revision as of 16:59, 15 August 2018
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	* Right to payment.		* Right to payment.
	* The causes of late payment in construction.		* The causes of late payment in construction.
		+	* The problems with retention.

	[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]		[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]

Editor at 15:14, 23 July 2018

2018-07-23T15:14:34Z

← Older revision		Revision as of 15:14, 23 July 2018
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	* Project bank accounts.		* Project bank accounts.
	* Pye Tait review.		* Pye Tait review.
		+	* Retainage.
	* Retention.		* Retention.
	* Retention bond.		* Retention bond.

Editor at 13:44, 4 June 2018

2018-06-04T13:44:33Z

← Older revision		Revision as of 13:44, 4 June 2018
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	* Construction supply chain payment charter.		* Construction supply chain payment charter.
	* Fair payment practices for construction.		* Fair payment practices for construction.
		+	* Holdback.
	* Performance bond.		* Performance bond.
	* Project bank accounts.		* Project bank accounts.

Designing Buildings at 06:07, 20 April 2018

2018-04-20T06:07:51Z

← Older revision		Revision as of 06:07, 20 April 2018
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	By April 2018, more than 100 MPs (around 1 in 6 of all MPs) had expressed their support for the 'Aldous Bill', which calls on government to introduce new legislative proposals to place cash retentions in deposit protection schemes. The bill has received signatures from 61 MPs, including the Green co-leader Caroline Lucas, the shadow Chancellor John McDonnell, the Conservative MP Ken Clarke, and the Liberal Democrat leader Vince Cable.		By April 2018, more than 100 MPs (around 1 in 6 of all MPs) had expressed their support for the 'Aldous Bill', which calls on government to introduce new legislative proposals to place cash retentions in deposit protection schemes. The bill has received signatures from 61 MPs, including the Green co-leader Caroline Lucas, the shadow Chancellor John McDonnell, the Conservative MP Ken Clarke, and the Liberal Democrat leader Vince Cable.

−	In addition, since Carillion's collapse, a coalition of ~~over~~ 75 trade bodies has united behind Aldous' reform proposals, and later in April are due to present a petition to 10 Downing Street.	+	In addition, since Carillion's collapse, a coalition of more than 75 trade bodies has united behind Aldous' reform proposals, and later in April are due to present a petition to 10 Downing Street.

	= Find out more =		= Find out more =

Editor at 09:54, 18 April 2018

2018-04-18T09:54:31Z

← Older revision		Revision as of 09:54, 18 April 2018
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−	Retention is a percentage (often 5%) of the amount certified as due to a contractor on an interim certificate, that is retained by the client. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract. Half of the amount retained is released on certification of practical completion and the remainder is released upon certification of making good defects. For more information see: Retention.	+	Retention is a percentage (often 5%) of the amount certified as due to a contractor on an interim certificate, that is retained by the client. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract. Half of the amount retained is released on certification of practical completion and the remainder is released upon certification of making good defects. For more information, see Retention.

	However, retentions can be considerable sums of money and they can cause cash flow problems for contractors, in particular if there are difficulties or disputes in relation to their payment.		However, retentions can be considerable sums of money and they can cause cash flow problems for contractors, in particular if there are difficulties or disputes in relation to their payment.
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	In October 2017, the government published the Pye Tait review; Retentions in the Construction Industry, which proposed the introduction of trusts for retention.		In October 2017, the government published the Pye Tait review; Retentions in the Construction Industry, which proposed the introduction of trusts for retention.

−	~~On Tuesday 9~~ January 2018 former charted surveyor Peter Aldous MP introduced The Construction (Retention Deposit Schemes) Bill 2017-19 to Parliament under the Ten Minute Rule.	+	In January 2018, former charted surveyor Peter Aldous MP introduced The Construction (Retention Deposit Schemes) Bill 2017-19 to Parliament under the Ten Minute Rule.
		+
		+	By April 2018, more than 100 MPs (around 1 in 6 of all MPs) had expressed their support for the 'Aldous Bill', which calls on government to introduce new legislative proposals to place cash retentions in deposit protection schemes. The bill has received signatures from 61 MPs, including the Green co-leader Caroline Lucas, the shadow Chancellor John McDonnell, the Conservative MP Ken Clarke, and the Liberal Democrat leader Vince Cable.
		+
		+	In addition, since Carillion's collapse, a coalition of over 75 trade bodies has united behind Aldous' reform proposals, and later in April are due to present a petition to 10 Downing Street.

	= Find out more =		= Find out more =

Designing Buildings at 09:53, 13 March 2018

2018-03-13T09:53:59Z

← Older revision		Revision as of 09:53, 13 March 2018
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	Those who oppose this solution argue that it reduces the available capital that can be paid out to creditors in the event of client insolvency.		Those who oppose this solution argue that it reduces the available capital that can be paid out to creditors in the event of client insolvency.

−	~~At present, it would appear~~ that the industry is not particularly supportive of using retention trusts. In March 2015, a petition on their use closed having attracted fewer than 2,000 signatures.	+	It had appeared that the industry was not particularly supportive of using retention trusts. In March 2015, a petition on their use closed having attracted fewer than 2,000 signatures.
		+
		+	However, in 2017 and 2018, support for their introduction increased, in particular following the collapse of Carillion.
		+
		+	On 26 April 2017, Alan Brown MP introduced the Construction Industry (Protection of Cash Retentions) Bill, but it did not progress because of the general election.
		+
		+	In October 2017, the government published the Pye Tait review; Retentions in the Construction Industry, which proposed the introduction of trusts for retention.
		+
		+	On Tuesday 9 January 2018 former charted surveyor Peter Aldous MP introduced The Construction (Retention Deposit Schemes) Bill 2017-19 to Parliament under the Ten Minute Rule.

	= Find out more =		= Find out more =
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	=== Related articles on Designing Buildings Wiki ===		=== Related articles on Designing Buildings Wiki ===

		+	* Construction (Retention Deposit Schemes) Bill 2017-19.
	* Construction supply chain payment charter.		* Construction supply chain payment charter.
	* Fair payment practices for construction.		* Fair payment practices for construction.
	* Performance bond.		* Performance bond.
	* Project bank accounts.		* Project bank accounts.
		+	* Pye Tait review.
	* Retention.		* Retention.
	* Retention bond.		* Retention bond.

Designing Buildings at 14:23, 16 February 2018

2018-02-16T14:23:37Z

← Older revision		Revision as of 14:23, 16 February 2018
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−	Retention is a percentage (often 5%) of the amount certified as due to ~~the~~ contractor on an interim certificate, that is ~~deducted from the amount due and~~ retained by the client. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract.	+	Retention is a percentage (often 5%) of the amount certified as due to a contractor on an interim certificate, that is retained by the client. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract. Half of the amount retained is released on certification of practical completion and the remainder is released upon certification of making good defects. For more information see: Retention.

−	~~Retentions~~ can be ~~large amounts~~ of money and ~~may~~ cause cash flow problems for contractors.	+	However, retentions can be considerable sums of money and they can cause cash flow problems for contractors, in particular if there are difficulties or disputes in relation to their payment.

−	In October 2017, the government published the Pye Tait review which sought to assess the costs and benefits of retentions ~~and~~ alternative mechanisms~~. One~~ of the ~~suggested alternatives was that retention could be held in a trust fund~~.	+	In October 2017, the government published the Pye Tait review which sought to assess the costs and benefits of retentions along with a number of alternative mechanisms for ensuring completion of the works.

−	~~The contractor may request the employer to set aside~~ the retention ~~into~~ a trust fund to guard against the risk of the ~~employer’s~~ insolvency~~. What this means is that if the employer were to go into liquidation~~, the retention money would not form part of their assets to be ~~claimed~~ by ~~creditors and theoretically,~~ the contractor ~~would be able to receive it~~. ~~Instead, the control~~ over the ~~cash flow~~ is passed on to an independent agent~~, and the contractor is assured of payment in accordance with the contract~~.	+	One of the suggested alternatives was that retention could be held in a trust fund. This can help guard against the risk of the client’s insolvency, as the retention money would not form part of their assets and so could still be received by the contractor. Control over the fund is passed on to an independent agent.

−	~~The limitations on~~ the ~~right~~ to ~~have~~ the ~~retention acknowledged as a trust have been recognised by the courts and are based on the principle~~ of the trust being ‘constituted’. In order for the trust to be constituted, the monies must first be deposited into the trust fund before the employer becomes insolvent. A trust fund can’t be constituted once the employer is insolvent.	+	Those who oppose this solution argue that it reduces the available capital that can be paid out to creditors in the event of client insolvency.

−	The argument in favour of retention trusts is that the money is protected from the risk of the employer failing and going into liquidation and/or administration. However, those who oppose them argue that it removes the available capital that can be paid out to creditors in the event of failure. At present, it would appear that the industry is not particularly supportive of using retention trusts. In March 2015, a ~~government~~ petition on their use closed having attracted ~~less~~ than 2,000 signatures.	+	At present, it would appear that the industry is not particularly supportive of using retention trusts. In March 2015, a petition on their use closed having attracted fewer than 2,000 signatures.

	= Find out more =		= Find out more =

Editor: Created page with "Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client. ..."

2018-02-13T14:53:10Z

Created page with "Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client. ..."

New page

Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract.

Retentions can be large amounts of money and may cause cash flow problems for contractors.

In October 2017, the government published the Pye Tait review which sought to assess the costs and benefits of retentions and alternative mechanisms. One of the suggested alternatives was that retention could be held in a trust fund.

The contractor may request the employer to set aside the retention into a trust fund to guard against the risk of the employer’s insolvency. What this means is that if the employer were to go into liquidation, the retention money would not form part of their assets to be claimed by creditors and theoretically, the contractor would be able to receive it. Instead, the control over the cash flow is passed on to an independent agent, and the contractor is assured of payment in accordance with the contract.

The limitations on the right to have the retention acknowledged as a trust have been recognised by the courts and are based on the principle of the trust being ‘constituted’. In order for the trust to be constituted, the monies must first be deposited into the trust fund before the employer becomes insolvent. A trust fund can’t be constituted once the employer is insolvent.

The argument in favour of retention trusts is that the money is protected from the risk of the employer failing and going into liquidation and/or administration. However, those who oppose them argue that it removes the available capital that can be paid out to creditors in the event of failure. At present, it would appear that the industry is not particularly supportive of using retention trusts. In March 2015, a government petition on their use closed having attracted less than 2,000 signatures.

= Find out more =

=== Related articles on Designing Buildings Wiki ===

* Construction supply chain payment charter.
* Fair payment practices for construction.
* Performance bond.
* Project bank accounts.
* Retention.
* Retention bond.
* Right to payment.
* The causes of late payment in construction.

[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]]