Retention payments under construction contracts are shortly
going to be required to be held on trust until they are paid.
The Government announced this week that the Construction
Contracts Amendment Bill currently before Parliament will be
amended to:
- Impose a trust obligation on retention money;
- Prevent the money from being used for other purposes;
- Impose penalties where the money is used for other
purposes;
- Provide for a default interest rate for late payment of
retentions; and
- Confirm that the prohibition on "pay when paid"
clauses applies to retentions.
A copy of the announcement can be accessed
here.
We are watching for the supplementary order paper to be released
for the detail on exactly how this will work and when this will
take effect. The Construction Contracts Amendment Bill is currently
drafted to take effect from 1 November 2014, but we don't yet
know whether that date will apply to these changes.
