"How do we get our retention back?" has to be one of the most regularly occurring questions asked by contractors of any construction lawyer.
More often than not, recovering unpaid retention results in compromise to avoid throwing good money after bad. A significant proportion of retention money never finds its way to (in particular) sub-contractors to whom it is due.
The issues around the use of retentions are well documented, particularly when retentions are lost as a result of insolvencies (take for example the huge retention losses following the collapse of Carillion).
With research carried out by Pye Tait showing that, compared to England, Scotland has a higher proportion of clients using retentions; major contractors using subcontractors' retentions as working capital or as part of their general expenditure; and money lost to insolvency.
It could also be argued the impact of retention losses is disproportionately higher north of the border than south.
The Scottish Government launched its consultation document on the practice of retentions in December 2019, with the process closing on 25 March, 2020.
A key recommendation of the Pye Tait report, and favoured by the Scottish Government, is for retention monies to be held in a mandatory retention deposit scheme (similar to what is now required for tenants' deposits). A fairer, more neutral and more protected approach to retentions would address many of the serious criticisms of the current retentions system.
Who knows, if these funds can no longer be used as working capital or general expenditure the demand for cash retentions may significantly decrease altogether.
Time — and the outcome of the consultation process — will tell.
research has estimated the value of retentions at any one time in the Scottish construction sector at around £124m with half being released at practical completion and half at the end of the defects liability period