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While inclusion of designers, quantity surveyors and engineers under the Construction Contracts Act 2002 came into effect on 1 September 2016, the provisions for retentions come into effect on 31 March 2017.

As advisors to clients and in your role as engineer/architect to the contract you will be interested to know the latest developments in this area.

Under the Construction Contracts Amendment Act 2015, retention money withheld under commercial construction contracts will be required to be held on trust. The purpose is to better protect retention money owed to contractors and subcontractors in the event of a business failure.

Kensington Swan identified a flaw in the transitional provisions of the Amendment Act, such that as of 31 March 2017 even retentions held on current contracts, that were entered into prior to 31 March 2017, would have to be held on trust as at that date. Kensington Swan’s views, provided to MBIE, were that this provision should be amended so that it was clear that retentions were only to be held on trust in relation to new contracts after 31 March 2017, or renewed contracts, or by agreement.

Yesterday the Government introduced a bill to Parliament amending the transitional provisions to confirm that the provisions relating to retention money in construction contacts will not apply to contracts signed before 31 March 2017. The Regulatory Systems (Commercial Matters) Amendment Bill clarifies that the retention money provisions of the Construction Contracts Amendment Act 2015 will apply only to contracts entered into or renewed on or after 31 March 2017.

If you have any questions regarding the Bill or the amendments to the CCA, do not hesitate to contact Stuart Robertson, Partner, Auckland, on 09 375 1151



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