The retentions regime in the Construction Contracts Act 2002 is on the road to repair with the introduction of the Construction Contracts (Retention Money) Amendment Bill (Bill) on 1 June 2021. The Bill has passed its first reading and has now been referred to the Transport and Infrastructure Select Committee for consideration. Public submissions are invited by 23 July 2021.
The shortcomings with the retentions regime are well known and were exposed by Ebert Construction’s failure in 2018 (we have covered these in earlier articles which are linked further below). The Bill is therefore welcomed and MBIE appears to have largely listened to the industry’s feedback.
The key changes proposed in the Bill are:
- Automatic Trust: Retentions would be automatically held on trust as soon as an amount becomes retention money, regardless of any payment or other steps taken.
- Retentions Account: Retentions would need to be kept in a dedicated retentions account, and could only be co-mingled with other retentions. Proper accounting records to be kept.
- Reporting Obligations: The retentions holder would need to provide prescribed information about how/where retention money is kept at the outset and at least every three months.
- Offence/Penalties: Breaching the regime would be an offence, with a fine of up to $200,000 for the holder and $50,000 for the holder’s directors. “Directors” is widely defined.
For our further discussion and Quick Guide to the proposed changes, please click HERE.
See our previous commentary on the Retentions
If you have any questions about the Bill or retentions generally, please get in touch with our Construction Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.