Can unpaid retention or a final account prescribe?
When a South African contractor's claim for retention or a final account starts to prescribe, what delays or interrupts it, and how to spot old balances.
By Achekam · · 5 min read · For Construction businesses in South Africa
Retention is the money a contractor has already earned and agreed to wait for. The waiting is the risk. A job finishes, the site team moves on, the defects period runs out quietly, and two or three years later someone in the office finds a retention balance that nobody ever invoiced or chased. The same happens with final accounts that stall in negotiation and are never closed.
In South Africa, a claim that sits long enough can prescribe: the debt is extinguished and the contractor can no longer enforce it. The Prescription Act 68 of 1969 sets the rules. This article explains, in plain terms, when the clock starts on retention and final account claims, what slows or resets it, and how to keep old balances in view. It is general information; for a specific claim near its deadline, speak to an attorney.
How long a contractor has: three years for most debts
Section 11 of the Act sets different periods for different kinds of debt. Thirty years applies to debts secured by a mortgage bond, judgment debts and tax debts. Fifteen years applies to certain debts owed to the State from loans or sales or leases of land. Six years applies to debts on a bill of exchange, another negotiable instrument or a notarial contract. Every other debt prescribes after three years, unless another Act of Parliament provides otherwise.
An unsecured claim under a building contract, for retention or the balance of a final account, will ordinarily fall into that last group; ask an attorney if the contract was notarial or the debt is secured. Three years is a long time on a single job and a short time across a business with dozens of them.
The Department of Justice publishes the Prescription Act 68 of 1969 in full, including the sections on when prescription begins and what delays or interrupts it.
When the clock starts on retention and final accounts
Under section 12, prescription starts to run as soon as the debt is due. A debt is not treated as due until the creditor knows who the debtor is and the facts that give rise to the debt, or could have learned them by taking reasonable care. If the debtor wilfully prevents the creditor from learning of the debt, prescription only starts once the creditor becomes aware of it.
For a contractor, "due" is decided by the contract. Where the contract releases retention in portions, each portion has its own date. The final account becomes payable when the contract's provisions on the final account say so. So the first job is a reading exercise:
- find the clause that releases each portion of retention, and note the event that triggers it;
- find the clause that makes the final account balance payable;
- record the date each event actually happened on site, not the date you hoped it would.
If you cannot tell from the contract when a portion fell due, that uncertainty is itself a reason to take advice early rather than late.
Acknowledgements and summonses
Two events interrupt prescription and make it start again.
An acknowledgement by the debtor. Section 14 says an express or tacit acknowledgement of liability by the debtor interrupts prescription, which then starts to run afresh from the day of the interruption. The section is about what the debtor does. A client's letter or e-mail confirming that the retention is owed, or a written payment arrangement, is the kind of document to keep carefully with the job file.
Serving a claim. Section 15 says prescription is interrupted by serving on the debtor any process claiming payment, such as a summons. The interruption lapses unless the creditor goes on to obtain final judgment, or the debtor acknowledges liability. After judgment, prescription runs afresh from the day the judgment becomes executable, and a judgment debt falls into the thirty-year group in section 11.
Sending your own invoice or statement does not appear in either section. Do not rely on a reminder e-mail to protect a claim that is close to its third anniversary.
Arbitration, liquidation and reciprocal debts
Section 13 does not restart the clock but delays the moment prescription is completed. Where certain impediments exist, prescription is not completed until a year after the impediment ends. The section includes situations a contractor may meet:
- the debtor is outside the Republic;
- the debt is the subject of a dispute referred to arbitration;
- the debt is claimed against a deceased or insolvent estate, or against a company in liquidation.
Section 13(2) adds that a contractual debt does not prescribe before a reciprocal debt arising from the same contract prescribes. Whether a client's counter-claim and your retention claim are reciprocal debts under the same contract is a legal question, and one worth asking when a dispute about defects and a dispute about payment run side by side.
Seeing old balances before they lapse
Prescription is easier to prevent than to argue about. Anything you have invoiced is visible in the books; anything you have not invoiced needs its own list.
In Achekam, receivables are aged into 0-30, 31-60, 61-90, 91-120 and over 120 days, with overdue totals. The over-120 column is where forgotten balances end up, and it deserves a monthly look with one question for each line: when did this debt fall due under the contract, and how far is that from three years? The age analysis counts from the invoice, which is not always the date the debt became due, so check the contract date where they differ.
For each client with an old balance, the server produces a statement of account as a PDF that can be e-mailed, and the screen shows whether it was sent. A statement is a good prompt for a reply. A reply in which the client confirms the balance is the document that matters under section 14, so file it.
How retention is invoiced affects what the age analysis shows. If you invoice progress claims net of retention, as invoicing so retention is not chased as overdue describes, unreleased retention sits outside receivables, and the release diary below becomes your only safeguard.
A release diary for every job
Keep one register across all jobs, reviewed monthly:
| Job | Event | Date due under the contract | Third anniversary | Invoiced? | Client's acknowledgement on file? |
|---|---|---|---|---|---|
| Each job | First retention release | from the release clause | three years later | invoice number | date of letter |
| Each job | Final retention release | from the release clause | three years later | invoice number | date of letter |
| Each job | Final account balance | from the contract | three years later | invoice number | date of letter |
Close each final account as soon as the measurement allows; reconciling the final account covers that work. Then open the register this month and add a line for every job finished in the past three years.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
