Retentions Regime: On the Road to Repair

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 

Retentions Regime: Government Announces Changes

Administration of Retentions Trust:  Oorshot v Corbel Construction

Ebert Construction:  Court provides Guidance on the Retentions Regime

Ebert Construction:  Receivership and Liquidation

Ebert Construction:  What you need to know

Clarification of retentions requirements for construction contracts

Changes to the Construction Contracts Act 2002

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.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

Liquidators’ Powers: Successful application under section 266 of the Companies Act to examine former director
Liquidators have wide-ranging powers under the Companies Act 1993 (Companies Act), including the power to request directors, shareholders or any other relevant person to assist in the liquidation of a...
19.07.2021 Posted in Company & Insolvency and Restructuring
Enforceability of limitation clauses
Construction contracts and contracts for professional services typically include a range of provisions which seek to allocate risk between the parties, and limit potential liability to be attributed to one party.
NZS 3910 Court Judgment, With Implications
The High Court decision in Hellaby Resource Services Ltd v Body Corporate 197281 [2021] NZHC 554 is a rare NZS 3910 decision, with implications for the construction sector. 
09.07.2021 Posted in Construction
ASB Showgrounds liquidation – An iconic venue in strife
The events industry has been strongly affected by Covid-19.
The Shipping Law Review 2021 8th Edition
The Hesketh Henry marine team pen the New Zealand chapter of The Shipping Law Review.
02.07.2021 Posted in Maritime
At first glance: Overseas Investment Amendment Bill (No 3) 2021
The Overseas Investment Amendment Bill (No 3) (Bill) received royal assent on 24 May 2021
Construction Contractor Controversy: Guidance on the Status of Contractors
Workers in the construction industry are frequently engaged as independent contractors.
18.06.2021 Posted in Business Advice & Construction & Employment
Send us an enquiry
For expert legal advice, please complete the form below or call us on (09) 375 8700.
  • This field is for validation purposes and should be left unchanged.