Problem: Over the last 8 months my company have been carrying out work for a property developer on some barn conversions. I gave a set of rates to carry out the plastering work which the developer agreed to and work commenced.
We have completed 6 of the 7 barn conversions and have been paid for the work completed. However, the property developer has now said that it is going to withhold monies for a retention fund. My question is, can the developer legally stop money when there’s no written contract in place?
Barry, Loughborough
Response: Hello Barry. There is a binding contract between you and the developer. You offered to carry out plastering work to a specification against set rates, which the developer accepted (albeit in writing or orally) – at the point of acceptance, both parties have entered into a legally binding contract.
Even though the contract may be lacking in certain expressed terms, there will be terms implied like, for example, you must carry the work out within a reasonable time, or the work must be executed using reasonable skill and care. However, the contract does not include for a retention hence the developer is not entitled to withhold any monies. If the developer wanted a retention, he should have ensured you were engaged under a properly drafted contract.
And it is NOT the industry norm to hold a retention fund. Retention is a contractual arrangement, as opposed to being implied through standard industry practice. If latent defects are discovered, regardless whether a retention is held or not, a contractor remains liable to make good its work. In any event, there are alternatives to retention such as bonds and insurances.
You should also take some time out and familiarise yourself with the Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local Democracy, Economic Development and Construction Act 2009). This act implies certain terms into your contract like, for example, implying a payment mechanism if the contract is silent or the terms are inadequate, and the right to refer a difference or dispute arising from under the contract to adjudication (which is a 28 day process, the decision of which is [temporarily] binding on both parties). If therefore the developer ignores your protests and deducts a retention, refer the dispute to a construction adjudicator – that will soon wake your employer up!
Good luck with the final barn conversion
© Michael P. Gerard MSc, PGDipLaw, PGDipBar, FCIOB, MCIArb, MAE
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Author background
Michael is a Barrister, Chartered Builder, Registered Adjudicator & Accredited Expert in quantum and planning matters. He is Managing Director of Michael Gerard & Co www.michael-gerard.co.uk, a company of chartered building consultants and quantity surveyors who provide a specialised service in the areas of construction law, quantum, programming, business recovery and insolvency support to the construction industry. Michael is also a consultant with Silver Shemmings LLP, a London practice of solicitors specialising in construction.