Service Agreement Template for Construction Businesses (UK 2025)
Last updated: February 2025
Why Construction Businesses Need a Service Agreement
Construction service agreements govern the relationship between the client and main contractor, or between the main contractor and specialist subcontractors, covering project delivery, quality standards, and payment terms in compliance with the Housing Grants, Construction and Regeneration Act 1996. These agreements must address progress payments, retention, defect rectification, and the adjudication provisions required by statute. JCT and NEC standard forms are common but bespoke agreements are often needed for smaller projects.
Key Clauses for Construction
- Payment terms compliant with the Construction Act 1996
- Defect liability period and rectification obligations
- Retention provisions with clear release conditions
- Health and safety obligations under CDM Regulations 2015
Common Mistakes
- Not including statutory adjudication provisions required by the Construction Act 1996
- Failing to specify clear payment application, notice, and pay-less notice procedures compliant with the amended Construction Act
Template Sections
- Payment schedule with Construction Act compliant notices
- Defect liability and snagging obligations
- CDM Regulations compliance and health and safety
FAQ
Must a construction service agreement include adjudication provisions?
Yes. The Housing Grants, Construction and Regeneration Act 1996 gives either party the right to refer disputes to adjudication at any time. If your agreement does not include compliant adjudication provisions, the Scheme for Construction Contracts will be implied automatically. It is better to include your own tailored provisions than to rely on the statutory default scheme.
How do retention provisions work in construction service agreements?
Retention is typically 5% of the contract value, reduced to 2.5% at practical completion, with the remaining 2.5% released at the end of the defect liability period, usually 12 months. Your agreement should specify the exact percentages, release conditions, and that retention money is held on trust for the subcontractor, as required by some standard forms.
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Get Started FreeThis is guidance for UK businesses, not legal advice. Templates are illustrative. Consult a solicitor for complex matters.
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