The Construction (Retention Deposit Schemes) Bill 2017-19 (also known as the Aldous Bill) is a Private Member’s Bill currently under consideration by Parliament, which is designed to improve retention practices in the construction industry and provide greater financial safeguards for small construction companies. The Bill was first suggested to Parliament by Peter Aldous MP, who is a former charted surveyor, on Tuesday 9th January 2018.
The Bill has, however, faced several delays from being read in Parliament for a second time (the Bill passed its first reading), which is required for the Bill to come into effect. The second reading was originally meant to take place on 27th April 2018 but was postponed on several occasions due to various reasons.
What Is A Retention And What Are The Current Issues With Them?
A financial retention in a construction contract is a percentage (generally 5% but sometimes 10%) of the amount specified as due for payment to a contractor of a building or engineering project that is kept by a client to ensure that the contractor appropriately completes the construction works. Retention clauses can also be enforced on sub-contractors.
The retention amount is held as security in case the contractor or sub-contractor fails to return to correct any issues in the work they have undertaken. The amount should be returned to the contractor or sub-contractor within a year of the handover of the building works.
It is a fairly frequent problem in the construction industry that the retention amount is returned late, or in some cases, not at all. This can then cause a cash flow issue for the contractor or sub-contractor in question. This can be extremely detrimental to a lot of small businesses in the construction sector, as there can often be delays of up to three years before the retention monies is returned to them.
What Does The Aldous Bill Propose?
The Aldous Bill aims to offer financial protection in connection with construction contracts and for connected purposes by holding retentions in a third party trust scheme. The trust scheme would hold the monies securely and released when appropriate, thus avoiding a lengthy delay with the retention amount being caught up in any administration or insolvency proceedings.
During the first reading of the Bill, Peter Aldous commented:
“This Bill is relatively straightforward. It would amend the Construction Act to require the Secretary of State to introduce regulations to protect retentions. It would bring closure to the many efforts made in the past to address the problem. In doing so, it would transform the prospects of SMEs, which make up 99% of firms in the UK construction industry.”
How Nelsons Can Help
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