Wave goodbye to your retention?

That's exactly what will happen if cross-bench peer Lord Aberdare is successful in steering his Construction (Retentions Abolition) Bill (the "CRA Bill") through Parliament.

The CRA Bill is a second attempt by parliament in recent years to regulate retention under construction contracts after the Aldous Bill (named for its sponsor, former chartered surveyor and MP Peter Aldous) became the victim of Parliament's prorogation in late 2019.

However, whilst the Aldous Bill would have created a mandatory retention deposit scheme, where an independent third party held and safeguarded retention monies, the CRA Bill goes significantly further and seeks to do away with retention altogether.

The CRA Bill itself (a copy of which can be found here) is very short but sets out that:

• The provisions would apply to England and Wales only;
• They would come into force on 1 January 2025; and
• A new Section 113A would be added to the Housing Grants, Construction and Regeneration Act providing that:
  • Any clause in a contract enabling a payer to withhold retentions (defined as monies withheld to provide the payer with security for current and future performance of the payee's obligations under a contract) would be of no effect; and
  • Once the CRA Bill has come into force, all retentions still held at that time must be paid in full within 7 days.

These proposals clearly go far beyond anything which has been considered previously and, if they were implemented, would bring sweeping changes to construction contracts as we all know them.

Next Steps

The CRA Bill has passed its First Reading in the House of Lords, but that is simply a formality where the long title (indicating the content of the Bill) is read out by the individual introducing the bill. The CRA Bill will now move on to its Second Reading (the date for which is still to be announced) where it will receive its first proper scrutiny, allowing concerns and potential amendments to be discussed. Thereafter, it will pass to committee stage for a detailed line by line examination. Only time will tell whether there is sufficient support for the CRA Bill in the House of Lords for it to move towards the Commons and the statute books.

However, it is likely the CRA Bill will also need support of the industry to succeed. A significant number of industry bodies (more than 80 bodies, representing more than half a million companies and self-employed professionals) threw their support behind the Aldous Bill, but it isn’t yet clear whether the CRA Bill, given the sweeping changes proposed, will be able to gather the same broad base of industry support. We will be watching developments with interest.