Valuations

Retention

Retention is the retaining of money by the employer until all defects on the project have been made good, following completion of the actual construction phase. The defects liability period will be stated in the contract, but is normally 6 or 12 months.

Retention, traditionally 3% or 5%, is deducted from the gross valuation. It is held by the employer, who has a fiduciary interest in the money. However, the money is not the employer's, but rather is held in trust on behalf of the contractor until practical completion is achieved. Half the retention fund (one moiety) is released upon practical completion, with the remainder being realised on the issue of the making good defects certificate by the architect. Certain trades (lifts, piling, and so on) now offer retention bonds in lieu of the deduction as standard terms of business.

Although retention is shown in the valuation as a lump sum, retention on nominated sub-contractors or suppliers is stated individually on the statement of retention.

Other items are excluded from the imposition of retention. JCT SBC/Q clause 4.16.2) and DB16 clause 4.13.2). The surveyor should take care to familiarise themselves with the contract.

Liquidated and ascertained damages (LADs)

If the contract is not completed by the due date, and an extension of time has not been granted, then the employer may be entitled to deduct liquidated and ascertained damages (LADs) from interim certificates.

The value of LADs will be stated in the contract. However, for the employer to deduct LADs, a certificate of non-completion must first be issued by the architect.

The surveyor should not deduct LADs from the valuation. Rather, it should be noted in the covering letter that the employer has the contractual right to deduct LADs accrued between the note of the certificate of non-completion and the date of the valuation certificate.

LADs are a field in themselves, and their deduction should not be entered into lightly. The surveyor is advised to seek further guidance on this issue, should it arise.

Final calculations

All calculations should be arithmetically checked prior to issuing the valuation or interim certificate.

Value added tax (VAT) included on invoices should be deducted prior to inclusion in any calculations forming part of the valuation.