Contracts retention money provisions come into force on 31 March 2017

Posted: 30 March 2017

Building Controls Update 212
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The retention money provisions of the Construction Contracts Amendment Act 2015 will come into force on 31 March 2017.

The provisions are designed to better protect retention money owed to contractors and subcontractors in the event of a business failure, and ensure retention money withheld under construction contracts is responsibly managed.

The Regulatory Systems (Commercial Matters) Amendment Act came into force on 31 March 2017 and clarifies the amendments made in the Construction Contracts Amendment Act 2015 that:

  • retention money provisions only apply to contracts entered into, or renewed, on or after 31 March 2017.
  • developers or head contractors who choose to withhold retention money, have two options:
    • hold retention money on trust in the form of cash or other liquid assets readily converted into cash – the default option
    • obtain a financial instrument, such as insurance or a payment bond, to provide third-party protection to ensure payment of retention money.

No regulations in relation to retention money provisions under the Construction Contracts Act 2002 are currently proposed.

Construction Contracts Act 2002 has further information.

This information is published by the Ministry of Business, Innovation and Employment’s Chief Executive. It is a general guide only and, if used, does not relieve any person of the obligation to consider any matter to which the information relates according to the circumstances of the particular case. Expert advice may be required in specific circumstances. Where this information relates to assisting people: