T017 Contract Practice - Retention Rics Apc

Front 1

What is retention, what is its purpose of retention?

Back 1

It is a percentage, deducted and retained by the employer from each interim certificate.

An incentive for the contractor to complete the works promptly.

Financial comeback for the employer in the event of contractor default.

Front 2

What items do not have retention taken on them?

Back 2

Loss and expense amounts
Statutory fees and charges
Some additional insurance premiums
Opening up and testing costs
Fluctuations Options A and B

Front 3

What is the employer’s interest in retention?

Back 3

As a trustee for the contractor

Front 4

What should he do with it if requested by the contractor?

Back 4

Place it in a separate bank account
Label the account as being held in trust
Provide the contractor with statements showing the payments and amount of money in there
This should ensure that the money is available to the contractor in event of employer insolvency

Front 5

Who gets the interest accruing on retention money?

Back 5

The employer

Front 6

When is the retention released to the contractor?

Back 6

Half released in the interim certificate after PC

The remaining retention is released in the Final Certificate – after the Certificate of Making Good

Front 7

What is a retention bond?

Back 7

Provided by the contractor in lieu of taking retention from interim payments
It should be to the same value as the retention deducted would have been
Need should be stated in the contract particulars
A standard JCT form in contract schedules

Front 8

What happens if the contractor does not maintain the retention bond?

Back 8

The employer can deduct retention from interim payments
If the bond is subsequently taken out, the retention deducted must be repaid to the contractor

Front 9

What if the contract sum increases?

Back 9

Retention can either be deducted from interim payments on the additional amount or the retention bond value is increased

Front 10

Why might a retention bond be used?

Back 10

May be used in difficult market conditions to aid the contractor’s cashflow

Front 11

What are the disadvantages of a retention bond?

Back 11

Employer pays the premium for taking out the bond
Reduces the contractor’s incentive to complete to standard and promptly
Harms the employer’s cashflow
The employer would not get the interest accruing on the amount of the retention bond