Unpaid construction certificates, withheld retention or a disputed final account in Cyprus: the documents, contract terms and options to review.
A payment or retention disputed on your project?
Tell us whether you are seeking payment or responding to a claim, the stage of the project and what is disputed. A short description is enough for the first enquiry.
A payment certificate has been issued but remains unpaid. Retention is still being held after work has finished. Or the project has reached its final account, with each side producing a different balance. These are related problems, but the documents and contractual steps needed to address them may differ.
For a contractor, subcontractor or employer, the starting point is a clear payment record: what was applied for, what was certified, what was paid, and why the balance is disputed. Our construction lawyers can review a payment claim or a response to one. You can describe the issue before assembling the full project file.
Identify which payment is in dispute
Separate an unpaid certified amount from work that has not been certified, contractual retention and a disputed final account. Combining them into one demand can hide the question that needs an answer.
- An unpaid certificate: identify its number, issue date, amount, contractual payment date and any payment received against it.
- Work omitted from a certificate: identify the application, the work claimed and the reason given for omitting or reducing it.
- Retention: identify each deduction, the accumulated balance and the condition relied on for release.
- The final account: compare the parties' calculations line by line, including previous payments and disputed deductions.
Keep the main contract and any subcontract distinct. Record who engaged whom and which agreement the payment request concerns, rather than treating everyone on the project as a party to the same payment obligation.
A certificate must be read with the contract
A certificate is an important document, but its label does not establish that it finally settles every issue. Review the provisions governing certification, payment, correction and disputes, together with any amendments to the standard form.
Check whether the document is an interim valuation, a final certificate or a decision on a referred dispute. Record when it was received and what happened afterwards. A contractor should identify the contractual basis for the requested payment; an employer should identify the basis and supporting documents for any objection or deduction.
In Christoforos Pelekanos Ltd v. Kermia Ltd (1979), the Supreme Court refused a stay of court proceedings because the employer had not given the written disagreement required by the particular arbitration clause. The clause contained a 14-day period. That was a decision about compliance with that contract, not a universal deadline or a ruling that every interim certificate is conclusive.
The practical question is therefore specific: what does this contract require after this certificate or decision, and what evidence records compliance?
When retention remains unpaid
For retention, establish the release mechanism and the evidence that the relevant stage has been reached. A statement that the project is finished needs to be matched to the completion, defects and certification provisions in the signed agreement.
Prepare a retention schedule showing the deduction from each payment, anything already released and the balance sought. Then collect the completion or handover documents, any defects lists, responses and records of remedial work. Check whether release is staged and whether a certificate, application or other step is specified.
Where the employer relies on defects or delay, ask for the particular item, its valuation and the contractual basis for the deduction. Keep those disputed sums visible rather than folding them into an unexplained retention balance. If the contract has been terminated, the review must also address its termination and accounting provisions.
Distinguish money retained from payments from a bank guarantee. They are different documents and arrangements; a request to release one should not assume that it resolves the other.
Bring the final account back to individual items
An effective final-account review reconciles the original scope, changes, valuations and previous payments against the disputed balance. Each difference should have an explanation and a document behind it.
In Konstantinos Mina Lazarou Ltd v. Yiallouros (2024), the Limassol District Court examined the particular contract's accounting mechanism, including sums claimed by both contractor and employer. The judgment illustrates why a contractor's gross claim alone may not answer what remains payable under that mechanism. It does not establish that every alleged deduction is valid.
A useful comparison schedule records:
- The contract item or variation and its supporting instruction or measurement.
- The amount submitted, certified and actually paid.
- Each side's position on the remaining amount.
- The reason for the difference and the document needed to resolve it.
In the Aristotelous and Lakis Georgiou J.V. v. Municipality of Paphos judgment (2025), the Paphos District Court described a contract that provided for interim certification of undisputed parts of the draft final account while differences followed the dispute mechanism. Whether your contract offers that route needs checking. Both District Court decisions concerned their own agreements and evidence.
Variations, defects and delay need their own records
Separate the reasons for a payment dispute before assessing the total. A disagreement about whether extra work was instructed is different from a disagreement about its price, or a deduction attributed to defective work or delay.
For variations, collect instructions, drawings, quotations, approvals and measurements. Our article on variations to construction contracts addresses that issue separately. For defects, identify the item, the notification, the response and any assessment of rectification. For delay deductions, keep the programme, relevant notices and extension-of-time decisions with the calculation.
This organisation assists either side. It allows the review to distinguish an agreed item, an unsupported assertion and a disagreement requiring technical input. A quantity surveyor's or engineer's assessment can be considered where the dispute concerns measurement, valuation or the condition of the work.
What this means in practice
Begin with the contract, the disputed payment document, proof of payments and the correspondence explaining the disagreement. You can seek a defined review while the project continues or after completion; the next step should be chosen from the agreement and the evidence.
- Reconcile the figures. Keep amounts applied for, certified, paid and retained in separate columns. Make the VAT treatment clear without counting the same item twice.
- Prepare a dated sequence. Record applications, certificates, receipt dates, objections, notices and replies. Keep original documents alongside the summary.
- Identify the procedure. Review the notice and dispute provisions, including any architect's or engineer's decision and arbitration steps, before selecting formal action.
- Agree the review's output. This may be written advice on the payment position, an itemised request for clarification or a draft response. Negotiations, proceedings and technical work can be scoped separately.
For a first enquiry, state your role, whether the works are continuing, the payment or retention in dispute and any notice or decision already received. Describe your construction payment issue. A short description is enough to begin identifying the relevant documents and the work required.
Questions we are asked
Is a construction payment certificate always final and binding?
Its effect depends on the contract and the type of certificate. Read the payment, finality and dispute clauses together. In Pelekanos v. Kermia, the Supreme Court decided whether the contractual steps for invoking arbitration had been followed; that decision does not make every interim certificate conclusive.
When should retention be released?
Identify the release conditions in the actual contract, including any completion or defects milestone and certification requirement, then establish whether they have been satisfied. The review should separate retention from other disputed deductions and from any bank guarantee.
Can I discuss an unpaid certificate before the final account is agreed?
Yes. Tell us which certificate remains unpaid, what response you received and whether work is continuing. We can review that issue separately from the final account, while checking how the contract connects them.
Do I need every project document before making an enquiry?
No. Your role, the payment issue and any relevant dates are enough for the first message. We can then identify the documents needed for a defined review.
Sources
- Christoforos Pelekanos Ltd v. Kermia Ltd (1979) 1 C.L.R. 437, Civil Appeal 5360, Supreme Court of Cyprus, 6 September 1979, CyLaw archive on CyLII
- Ergoliptiki Etaireia Konstantinos Mina Lazarou Ltd v. Costas Yiallouros, Action 378/2013, Limassol District Court, 30 August 2024, CyLaw archive on CyLII
- A. Aristotelous (Construction) Ltd & Lakis Georgiou Construction Limited J.V. v. Municipality of Paphos, Consolidated Actions 144/2015 and 1243/2014, Paphos District Court, 28 February 2025, CyLaw archive on CyLII
This article is provided for general information purposes only and does not constitute legal advice.
Need advice on your own matter?
Briefly describe your situation, the people involved and any deadline.
We reply within one business day. We will ask for documents once we confirm we can act.
Receive legal updates by email
When Cyprus law changes, hear it from us
One short email when something changes that matters: new legislation, a decision worth knowing, a deadline. Written by the partners, no marketing, unsubscribe with one click.
You are on the list. The next update on Cyprus law will reach your inbox.
That did not go through. Please write to office@kleanthousplatis.com and we will add you.
Your address is used for these updates and nothing else. Privacy notice.