MORE INFORMATION- RETENTIONS

The Construction Contracts (Retention Money) Amendment Act came into effect 5 October 2023

The new rules apply to commercial construction contracts entered into after 5 October 2023, or that were entered into before that date and renewed afterwards

Party A is the party that withholds retention money e.g., a Main Contractor

Party B is the party that has retention money withheld from their payments e.g., a Subcontractor

It means that retention money cannot be used as working capital or cashflow, and that the retention holder is legally obliged to protect and account for the retention money until release

The Act provides for robust reporting and record keeping requirements, including but not limited to:

· Particular timing for providing reports and information e.g., full detailed reporting at least quarterly

· Records must identify specific details relating to the retention money e.g., transactional and bank account details

· Records must be made available for inspection upon request

Retention money is to be deposited into a compliant bank account with a registered New Zealand bank that is specifically and only used for holding retention money

Interest earned on retention money is typically not part of the retention money and can be retained by the party holding the retention money

Failure to comply with certain requirements can result in convictions and fines, on a 'per offence' basis. 

These include:

Failure to keep retention money in a separate account could result in a fine to Party A of up to NZD200,000, and to each director of Party A of up to NZD50,000

Failing to keep proper records, or provide reports to Party B could see Party A liable to a fine not exceeding NZD50,000