There is a slowdown in the housing sector of the Irish building industry. Some main contractors are engaged in both the housing and the commercial sectors. The financial consequences of the slowdown will, therefore, spill over into the commercial sector for that reason alone.
The financial pressures have now resulted in main contractors attempting to temporise in making due payments to sub-contractors. This has resulted in driving those financial consequences downwards in the sector. For nominated sub-contractors who have been assiduous, astute or fortunate enough to have adopted the Construction Industry Federation nominated sub-contractors’ contract form, the worst features of these consequences can be avoided.
The contract has the following clause in it:
Payments made to the Contractor in respect of work done and materials used by the Sub-Contractor shall until received by the Sub-Contractor be deemed to be money or moneys worth held in trust but without obligation to invest by the Contractor for the Sub-Contractor to be applied in or towards payment of the Sub-Contractor’s account, subject always to the right of adjustment by the Architect/Engineer in the event of his certifying that adjustment is necessary.
This has the consequence that, when the Employer (the person engaging the services of the main contractor) pays funding to the main contractor for work and services rendered by the nominated sub-contractor, that money belongs to the sub-contractor. The main contractor holds it in trust and is contractually obliged (under the main Royal Institute of Architects of Ireland contract form) to pay it to the sub-contractor within 5 working days of having received it.
Being trust money, it is not available for distribution to other creditors in the event of the insolvency of the main contractor.
Under no circumstances should the nominated sub-contractor accept any variation to the Construction Industry Federation nominated sub-contractors’ contract form.