Posted: 30 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.