Most standard forms of construction / building contract have a provision for the retention of a certain percentage of the amount due to the Contractor. The main purpose of retention monies is to serve as a protection mechanism for the Employer from the Contractor’s failure or default in his performance under the contract e.g. rectification of defective work. However, the retention monies are normally to be held by the Employer fiduciary as trustee for the Contractor. The said monies belong to the Contractor and the Employer only holds the retention monies in trust. Usually, the retention amounts often not exceeding ten (10) percent and is limited to five (5) percent of the contract sum
In this series, Entrusty Group will provide the answer to the frequently asked question – Should retention sum be placed under a separate bank account ?