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Day to Day Conveyancing: Completion Day Retentions

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completion day retentionsWhen you are buying a new house, especially at this time of year, there is often a rush to move in prior to the Christmas and New Year break.

Where a Builder has some work outstanding or incomplete documentation on the completion date for your purchase , it is quite common for your Conveyancing solicitor, to agree a retention from the completion monies, he or she has to hand over to the Builder.

You may have heard the term “snagging list” used in this context.

The purpose of retention is to act as security for the purchasers by ensuring that they have a sufficient sum available to indemnify themselves in respect of any loss or damage they might suffer through a failure by the Builders. Worst case scenario, you could get any remedial works done by yourself and take it out of the retention monies.

Time Scale for Retentions

A date is normally agreed 3/6 months after completion.

During this period the Builder is expected to rectify any “snags” or repair minor defects which occur after completion.

Once completed to the satisfaction of the Buyer, any retention is released to the Builder.

A Recent Case Challenged A Long Standing Completion Day Retention

This case made it to the Court of Appeal and found in favour of a Developer who was still waiting release of a retention of £35,000 from a property which was completed in 2001.

The Buyers had tried to argue that the Developer and the Builder had failed to enter into a special agreement called a Section 106 Agreement with the local authority and that there were outstanding items on their snagging list.

The Court’s Decision

The Court decided that the effect of the Contract was clear from a logical point of view but may have not been fully stated.

The Buyers were obliged to give the Developer a reasonable opportunity to complete its obligations.

If the Developer failed to do so, the Buyers were entitled to an indemnity in respect of any loss or damage they suffered as a result.

But the balance, if any, of the retention would then be payable to the Developer/Builder  as the outstanding part of the purchase price.

The Court decided that it was right for the retention to be returned to the Developer/Builder less an amount “set-off” against any loss or damage suffered by the purchasers as a result of any failure by the Developer and their Builders to perform their various obligations. 

What This Means for You If You Are Buying a New House?

The facts of this case were a bit more complicated because a Developer and a Builder were involved and there were tricky issues with the Local Authority as well.

Luckily, for most Buyers from major and minor Builders, you have the additional benefit of the National House Builder’s Council (NHBC) to intervene or mediate. The NHBC do carry some extra clout.

Perhaps, if you are faced with outstanding works you could try and impose a longstop date after which if the works have not been completed satisfactorily you could have the works completed yourself. You would still have to hand over any balance to the Builder.

As always if you are in doubt consult with your own Conveyancing Solicitor.

The full judgment can be viewed here.

Paul Hajek