Construction (Retention Deposit Schemes) Bill (HC Bill 148)

A

BILL

TO

Make provision about protecting retention deposits in connection with
construction contracts; and for connected purposes.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—

1 Retention deposit schemes

(1) The Housing Grants, Construction and Regeneration Act 1996 is amended as
follows.

(2) After section 111, insert—

111A 5 Retention deposit schemes

(1) The appropriate national authority must by regulations made by
statutory instrument make arrangements for securing that one or more
retention deposit scheme is available for the purpose of safeguarding
any cash retention withheld in connection with construction contracts.

(2) 10For the purposes of this section and section 111B—

(a) “cash retention” means monies which are withheld from
monies which would otherwise be due under a construction
contract, the effect of which is to provide the payer with security
for the current and future performance by the payee of any or
15all of the latter’s obligations under the contract, and

(b) “retention deposit scheme” is a scheme which—

(i) is made for the purpose of safeguarding cash retentions
withheld in connection with construction contracts and
facilitating the resolution of disputes arising in
20connection with such cash retentions, and

(ii) complies with regulations made under this section, and

(c) “construction contract”, in addition to the meaning given by
section 104, shall also include any contract created to have a
similar effect to a construction contract for the purposes of

Construction (Retention Deposit Schemes) BillPage 2

withholding monies which would otherwise be due under the
contract.

(3) Regulations under subsection (1) must in particular provide for—

(a) arrangements to be made with any body or person under which
5the body or person (“the scheme administrator”) undertakes to
establish and maintain a retention deposit scheme,

(b) the selection and appointment of a scheme administrator,

(c) the funding and management of a retention deposit scheme, in
particular provision to ensure that only retention deposits and
10any interest accruing on such monies is held in the scheme, and

(d) the mechanism by which retention deposits are released from
such a scheme.

(4) In this section “appropriate national authority” means—

(a) in relation to England, the Secretary of State,

(b) 15in relation to Wales, the Welsh Ministers, and

(c) in relation to Scotland, the Scottish Ministers.

(5) A statutory instrument containing regulations made by the Secretary of
State under this section may not be made unless a draft of the
instrument has been laid before and approved by a resolution of each
20House of Parliament.

(6) A statutory instrument containing regulations made by the Welsh
Ministers under this section may not be made unless a draft of the
instrument has been laid before and approved by a resolution of the
National Assembly of Wales.

(7) 25A statutory instrument containing regulations made by the Scottish
Ministers under this section is subject to the affirmative procedure.”

2 Retention deposit schemes: contractual requirements

(1) The Housing Grants, Construction and Regeneration Act 1996 is amended as
follows.

(2) 30After section 111A (inserted by section 1 of this Act), insert—

111B Retention deposit schemes: contractual requirements

(1) Any clause in a construction contract, entered into after the passing of
the Construction (Retention Deposit Schemes) Act 2018, which enables
a payer to withhold cash retentions shall be of no effect unless—

(a) 35upon their withholding, the monies are deposited forthwith in
a retention deposit scheme under section 111A, and

(b) prior to the first withholding of the monies, the payer has
notified—

(i) the payee of the scheme administrator’s name and
40contact details, and

(ii) the scheme administrator of the payee’s name and
contact details.

(2) If, after the coming into force of section 2 of the Construction (Retention
Deposit Schemes) Act 2018—

Construction (Retention Deposit Schemes) BillPage 3

(a) any cash retention already withheld is not placed in a retention
deposit scheme under section 111A, or

(b) the payer has not notified—

(i) the payee of the scheme administrator’s name and
5contact details, and

(ii) the scheme administrator of the payee’s name and
contact details,

the payer must, not later than 7 working days after the date on
which the cash retention was withheld, refund the cash
10retention in full to the payee.

(3) In this section—

“working days” shall be taken to exclude Saturdays, Sundays,
Christmas Day, Good Friday and any day which is a bank holiday.”

(3) In section 112(1), leave out “requirement in section 111(1) applies” and insert
15“requirements in section 111(1) or section 111B(2) apply”.

3 Power to make similar provision for Northern Ireland

(1) Her Majesty may by Order in Council make provision for establishing
retention deposit schemes in respect of construction contracts in Northern
Ireland.

(2) 20The power in subsection (1) is limited to the type of provisions made by this
Act in respect of England and Wales, and Scotland.

(3) An Order in Council under subsection (1) may make different provision for
different purposes.

(4) An Order in Council under subsection (1) may make such amendments of the
25law of any part of the United Kingdom as appear to Her Majesty to be
necessary or expedient in consequence of any provision made by or under—

(a) Northern Ireland legislation; or

(b) any Act of Parliament passed before this Act in so far as the provision
is part of the law of Northern Ireland.

(5) 30An Order in Council under subsection (1) may contain such consequential and
supplemental provisions as appear to Her Majesty to be necessary or
expedient.

(6) No recommendation shall be made to Her Majesty to make an Order in Council
under this section unless a draft of the Order has been laid before and
35approved by resolution of each House of Parliament.

(7) In this section, “Northern Ireland legislation” has the same meaning as in
section 98(1) of the Northern Ireland Act 1998 (interpretation).

4 Extent, commencement and short title

(1) This Act extends to England and Wales, Scotland and Northern Ireland.

(2) 40Sections 1, 3 and this section come into force on the day on which this Act is
passed.

(3) Section 2 comes into force—

Construction (Retention Deposit Schemes) BillPage 4

(a) in relation to England, on such day as the Secretary of State may by
regulations appoint,

(b) in relation to Wales, on such day as the Welsh Ministers may by
regulations appoint, or

(c) 5in relation to Scotland, on such day as the Scottish Ministers may by
regulations appoint.

(4) This Act may be cited as the Construction (Retention Deposit Schemes) Act
2018.