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Law Changed to Protect Subcontractors

4 April 2023

Thursday, 30 March 2023 9:16 am | New Zealand Government Press Release
Tags: Parliament, Employment, Newsworthy, General Politics, Legislation.

Hon Dr Megan Woods

Minister for Building and Construction

  • Legislation passed to safeguard subcontractors’ retention money

· Ensures strict penalties for companies who fail to meet their obligations to subcontractors

· Helps ensure building work is done right first time, and acts as an insurance that the subcontractor will return if there are any defects.

Changes have been made to legislation to give subcontractors the confidence they will be paid the retention money they are owed should the head contractor’s business fail, Minister for Building and Construction Megan Woods announced today.

“These changes passed in the Construction Contracts (Retention Money) Amendment Act safeguard subcontractors who are often the first to miss out in the event a construction company becomes insolvent,” Megan Woods says.

“While it is not a requirement to hold retention money, many head contractors choose to withhold part of their payment to specialist tradespeople for up to 12 months. This is one way to help ensure building work is done right first time, and acts as an insurance that the subcontractor will return if there are any defects.

“The changes made today provide important protections for subcontractors so they can be certain their payment is kept safe, can’t be used for any other purpose, and will be paid out should the head contractor’s business fail.”

Companies and directors who choose to hold retention money against subcontractors will now be required to hold retention money on trust in a separate bank account, which is unable to be mixed with other company money or assets. Information about the retention money held must be reported to subcontractors on a regular basis, at least once every 3 months.

Where retention money is kept, there will be a strict liability offence for failing to hold retention money properly: for every breach of the retentions regime directors will face fines of up to $50,000 and companies will face fines of up to $200,000. It will also be an offence to intentionally provide false information about retentions money held for a subcontractor, with a fine of up to $50,000 for each breach.

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