My retention is stuck with a main contractor that has gone bust
The job finished months ago, the retention was never released, and now the main contractor is in liquidation.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
Your retention is usually held in the main contractor's general funds, mixed with its own money. So in a liquidation it is a debt like any other. You rank as an unsecured creditor, with no security for the debt, and usually get back only a few pence in the pound. Some subcontracts say the retention is held on trust for you. That helps only if the money was actually put in a separate account, and most never were.
The liquidator, the insolvency practitioner winding the company up, will also deduct anything the main contractor could have claimed from you. That means defects, the cost of finishing your work and back-charges raised late. A retention claimed as a round figure is easy to cut and hard to defend. It needs the release dates and the work it relates to.
The solution
Claim the retention as its own line, not buried in a total. Set out the percentage, the release dates and the completion events that triggered each half, checked against your subcontract. If the subcontract says the retention is held on trust, ask your solicitor whether any money was ever set aside. Then answer each defect and back-charge the liquidator deducts, line by line.
Insolvency Claim builds and evidences that claim with you, so the balance you claim is the one that survives. We then lodge it and negotiate it with the liquidator. Our Handover Pack shows what the gap cost you, and Insolvency Loss Prevention keeps the amount at risk small on your next job.
Example
Illustrative example. The scenario and figures are invented.
The facts
A window installer's £610,000 package reached practical completion 8 months before its main contractor went into liquidation. Retention at 3%, £18,300, is still held, although the first half was due for release at practical completion.
What happens
- The subcontract's release dates are set out: half at practical completion, and half at the end of the rectification period, which has not yet ended.
- The liquidator's agents set £6,800 of defects against the retention.
- The handover photographs show that other trades did £4,200 of the damage after the windows were signed off. That part is answered with the photographs.
- £2,600 of genuine defects is accepted.
The retention in figures
| Item | Amount |
|---|---|
| Retention held at 3% | £18,300 |
| Defects claimed by the liquidator | £6,800 |
| Defects accepted | £2,600 |
| Retention claim admitted | £15,700 |
The outcome
The retention claim is admitted at £15,700 rather than the £11,500 the liquidator's first figure left. The Handover Pack notes that the first half had been overdue for 8 months without a single written request for release.