The Government is promising better protection for
sub-contractors' retention payments through a Supplementary
Order Paper (SOP) to be introduced to the Construction Contracts
Amendment Bill when Parliament reconvenes after the election.
Drafting instructions for the SOP have been issued. Much will
depend on how well it is drafted as this is a difficult area to
legislate and there will not be the usual opportunity for public
submissions.
Background
Retentions are payments held back by the developer from the head
contractor or by the head contractor from sub-contractors,
traditionally as a security for performance. But the money is
commonly used as working capital in the meantime, and generally
falls to the liquidator in the event of insolvency, meaning
contractors and sub-contractors are left partly unpaid for work
they have completed.
