Door Industry Journal - Spring 2018

Also online at: www.dijonline.co.uk 20 THE door industry journal spring 2018 Industry News Retentions: Has the construction industry had enough following the Carillion disaster? By Jonathan Hyndman, Partner at Rosling King. The use of cash retentions is common place in the construction industry. Some £3 billion of retentions remain outstanding in the UK construction industry at any one time. With the collapse of Carillion, however, has the industry had enough? By deducting and retaining a percentage of the value of the works from interim payments due to the contractor during the construction phase, developers can be seen to enjoy an element of protection against late completion and defects arising during the rectification period. Similarly, main contractors will deduct and retain a percentage from each interim payment due to their subcontractors again, to be released when the subcontract works have been completed and when the subcontractor has made good any defects. Widespread and persistent failures to release retentions on time or at all, whether because of simple breach of contract or the insolvency of the party holding the retention, has encouraged contractors at all levels of the supply chain to price the risk of their retention not being released into the contract sum. Reform of retentions in construction contracts has long been called for and The Construction (Retention Deposit Schemes) Bill, introduced as a Private Members’ Bill, received its first reading in the House of Commons on 9 January 2018; the Bill’s second reading is scheduled for 27 April 2018. Carillon’s collapse has brought the importance of the proposed legislation sharply into focus. The intention behind the Bill is the introduction of secondary legislation requiring cash retentions to be paid into a Government approved scheme and so ring fencing them from the other assets of the party holding the retention; the party to whom the retention is due will still be incentivised to complete on time and remedy defects but in the event of the retention holder’s insolvency, the cash retention, held in a Government approved scheme, would fall outside the insolvency process and would be available for downstream release before any creditor distribution. The proposals have met with widespread support through the construction industry with the statutory deposit scheme required in relation to deposits paid by tenants of shorthold tenancies to landlords being cited as a working example. Reform of retentions is overdue and welcomed. The intended protection of retentions against upstream insolvency in the construction industry will unfortunately come too late for Carillion’s sub-contractors and suppliers. RK LLP is a UK-based law firm specialising in serving the needs of financial institutions and private equity, real estate and construction clients. www.rkllp.com Staff at SWS UK support local homeless charity SWS UK have assisted their Human Resources Coordinator Janet Eastwood, who has together with her husband Peter, been actively supporting Tactical Street Angels, a local non-profit organisation dedicated to helping the homeless in and around Lancaster and Morecambe. Janet enlisted the support of her colleagues at SWS UK who rallied round to donate items such as warm clothing, toiletries and food. The donations were then distributed amongst the vulnerable members of the area’s homeless community and deposited at the Night Shelter in one of the city’s churches. Janet said: ‘Homelessness is sadly a problem that affects most towns and cities. I felt it was important to do all I could to help the most vulnerable members of our society, particularly during the harsh winter months. I was delighted with the response I received from my colleagues at SWS UK. The donations that came in were excellent and were gratefully received by the Tactical Street Angels’. Janet and her husband continue to support the charity and SWS UK are very proud of her involvement and contribution to such a worthy cause.