Get off-site materials paid for under a vesting certificate before they leave your yard
A vesting certificate says that materials still in your yard become your main contractor's once it pays for them, so it can pay before delivery. Use one for anything you make or store off site, and make sure ownership passes only when the money arrives.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
Why it matters
Materials you make or store off site are money you have already spent. Until they reach site and appear in a valuation, your main contractor usually owes you nothing for them. If it fails before then, you are left with stock made to its drawings, which nobody else may want. Your subcontract may allow payment for materials off site, often called listed items. The usual conditions are proof that you own them, marking them as the buyer's, keeping them apart, insuring them and sometimes a bond. A vesting certificate sets out that ownership passes to your main contractor on payment. Get the timing right. If ownership passes on signature rather than on payment, a failure in between leaves you with neither the goods nor the money.
How to do it
- Check whether your subcontract allows payment for materials off site, and on what conditions.
- Agree the list of items and their values before you order or make them.
- Prove your own title first: pay your supplier, or hold its written confirmation that the goods are yours.
- Store the items apart, mark them with the project and your main contractor's name, and insure them.
- Sign a vesting certificate that passes ownership on payment, and put the items in your next application.
Example
Illustrative example. The scenario and figures are invented.
The facts
A precast stair subcontractor has £84,000 of stair flights cast and stored in its yard, 6 weeks before the site is ready for them. Its main contractor's payments have started to slip, and the subcontract allows payment for listed items off site.
What happens
- The flights are agreed as listed items. The supplier invoices for the steel and concrete are paid, so the subcontractor's own title is clear.
- Each flight is marked with the project and the main contractor's name, stored apart and added to the insurance schedule.
- The vesting certificate says ownership passes when the payment arrives, not when it is signed.
- The £84,000 goes into the next application and is paid 4 weeks later.
The outcome
The main contractor enters administration 5 weeks after that. The flights are already paid for, so the subcontractor's claim is £84,000 smaller than it would have been with them unpaid in its yard.
To have this set up for you, see our Insolvency Loss Prevention service.