Lawyers warn of illegal retention clauses

摘要

Subcontractors are being given contracts containing illegal retention payment provisions, over three months after they were first outlawed, lawyers have warned, writes Vern Pitt. As of last October it became illegal for a client or main contractor to retain part of a payment for work completed because a separate contract was not yet complete, under changes to the Construction Act. Before the change in the law, the practice of clients or main contractors holding retention payments, which are often 5% of the value of a job, until the entire project had been signed-off had been a source of irritation to subcontractors. "Now those provisions are outlawed and the industry has not caught on to this," said Rudi Klein, chief executive of the Specialist Engineering Contractors Group. "You cannot hold on to payment when there's a defect to another part of the project and there's many instances of this going on." Klein said it left subcontractors exposed to the insolvency of clients and main contractors further up the chain, which would likely result in them not receiving full payment.