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, included a draft clause to rectify this 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 clarifying that new legislation 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. To view the Bill click here: Regulatory Systems (Commercial Matters) Amendment Bill
[This post was written by Kensington Swan partner Stuart Robertson]