The Construction Contracts (Retention Money) 2023 Act past on 5 May 2023 and takes effect to construction contracts signed on or after 5 October 2023.

Below we provide guidance to help you understand some substantial changes to the Act that the construction sector need to be aware of if dealing with retentions.

Guidance on the retention regime
The Ministry of Business, Innovation and Employment (MBIE) are responsible for monitoring compliance with the retention regime and to educate the sector on the regime.

Guide to the Retention Money Regime | The MBIE has just released this Retention Money Guide which provides a full overview of the retention money regime.
 
Guide to the Amendment Act | The MBIE provide a full guide on the Construction Contracts (Retention Money) Amendment Act 2023.
 
Live Webinar | The MBIE are hosting a webinar on Friday 25^th August at 12pm to talk about the Construction Contracts (Retention Money) 2023 Act. They will cover:

• What retention money is and who needs to comply;
• Reasons for change;
• What is changing;
• Offences and penalties for non-compliance;
• Next steps and guidance available.

This webinar is specifically for main contractors, sub-contractors, clients, and payment certifiers (QS’s and Engineers to Contract).

Register for this webinar here.

Non-compliance with the Act
MBIE can now enforce fines to companies and its directors if they withhold retentions but fail to comply with certain obligations in the new retention regime. The fines for each offence:

• Directors: (up to) $50,000 each director
• Entity: (up to) $200,000

Aon Retention Instrument
Aon can provide a complying instrument under the CCA called a Retention Instrument. It is the first and only complying instrument available in New Zealand. The Retention Instrument works by protecting a maximum specific dollar amount of retentions so that it is not necessary to hold retention money on trust in the form of cash, enabling these funds to legitimately be used within the business.

Advantages of a Retention Instrument:

• Frees up cash. Cash does not have to be held separately for retentions protected with a Retention Instrument.

• It is not an “on demand” instrument. There is a process for the legitimate payment around the claim of the retention to party B.

• Party A does not have to disclose other retentions that they hold on other party Bs or other commercially sensitive information.

• Party A has been financially vetted by the insurer and has met the financial criteria meaning the insurer is prepared to put its capital behind party A. 

• Complies with the CCA.

• Reduces risk of a breach of the CCA and a resulting fine. 

Read more about how the Retention Instrument works here.
Apply for a Retention Instrument here.

Contact
Warren Tucker
Aon National Manager Surety (Performance Bonds/ Retention Instrument)
Warren.tucker@aon.com | +64 9 362 9079 | +64 27 523 0085