The retention provisions in the Construction Contracts Act 2002 (CCA) were put in place to protect retention w88 register owed to subcontractors in the event of a business failure, and to ensure retention w88 register withheld under construction contracts is responsibly managed.
Every worker and small businessperson deserves to be paid for their work, and subcontractors need to feel confident that they will be paid what they are owed. Whether you regularly work as a head contractor, a subcontractor, or both, LBPS must understand their rights and obligations under the Construction Contracts Act.
The Construction Contracts Act was strengthened in April 2023 to provide extra protection for subcontractors if a head contractor chooses to hold retention w88 register.
Understanding retention w88 register
In practice, retention w88 register is usually withheld by a head contractor, as an assurance that the subcontractor will complete their work to the agreed standard. The subcontractor has up to 12 months after the job is finished to fix any defects in their work.
However, if a head contractor spends the w88 register they are retaining as retention w88 register and then becomes insolvent, the subcontractor could lose their w88 register.
The strengthening of the Construction Contracts Act is designed to ensure subcontractors still get the w88 register they are owed in the event of an insolvency. This means contractors and subcontractors can trust that work will be completed promptly to the terms of the contract, and everyone will be paid what they are owed when the job is finished.
Retention w88 register isn't mandatory
It is not a requirement to hold retention w88 register. Head contractors who choose to hold retention w88 register typically hold between 2% and 10% of the contract value, for up to 12 months after the job is finished.
The head contractor can then use this w88 register to remedy defects by the subcontractor, assuming their contract permits this and 10 working day's advance notice is given in writing.
The Construction Contracts Act does not set a minimum contract amount for retention w88 register to apply. This means the rules and requirements apply to all retention w88 register withheld under commercial construction contracts in Aotearoa New Zealand.
Understanding the requirements to hold retention w88 register
By law, the head contractors (who holds the retention w88 register) must hold the retention w88 register in trust. They must also provide reports to the subcontractor, when requested.
The requirements to hold retention w88 register include:
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ensuring that retention w88 register held as cash is also held separately in a bank account with prescribed ledger accounts
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using retention w88 register only to rectify non-performance of subcontractors' obligations under the contracts
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providing quarterly reports to each subcontractor from whom the retention w88 register is withheld.
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providing each subcontractor with a report after each transaction with their retention w88 register, promptly and free of charge.
It is also a requirement for retention w88 register to be paid out as soon as it is owed upon completion of the contract. If payments are late, interest can be charged by the subcontractor.
Whatever you put in your contract about retention w88 register, you can't change your obligations under the Construction Contracts Act, even if you add terms that go against it.
Offences and penalties have been updated
When the Construction Contracts (Retention w88 register) Amendment Act was passed, it also introduced offences and penalties for companies and, in some cases, directors who fail to hold retention w88 register on trust.
Offences have been introduced for:
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providing false information on retention w88 register
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failure to comply with accounting, recording and reporting requirements
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use of retention w88 register for a purpose other than fixing defects in the subcontractor's performance
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failure to provide regular information to the subcontractor on retention w88 register.
The Ministry of Business, Innovation & Employment (MBIE) has provided information and education for LBPs to help you better understand your rights and obligations, no matter what side of the job you are on.
Construction Contracts Act 2002 | Building Performance
Retention w88 register resources | Building Performance
If a head contractor is not fulfilling their obligations and is in breach of the retention w88 register regime, sub-contractors have the right to lodge a complaint with MBIE. A complaints form can be found on the website below.Breaches of the retention regime complaint sheet (building.govt.nz).
The detail is in the contract
When you decide to take on subcontracting work, the head contractor may choose to hold back a certain percentage of the contract value (usually between 2 and 10 percent) as ‘retention w88 register’. This w88 register provides security that the job will be completed, and defects will be remedied.
It is up to the parties involved as to whether they agree to retention w88 register being held, but it can only be held as part of a commercial construction contract.
If retention w88 register is held from you as part of a commercial construction contract, that contract must include certain details.
Check your contract and make sure it includes:
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the reason why retention w88 register is being withheld – this could be security for the proper completion of your obligations under the contract, including remedying defects.
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the percentage or amount of retention w88 register being withheld .
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the criteria to be satisfied before the w88 register is released to you (release of retention w88 register cannot be conditional on anything other than you completing your contractual obligations).
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the date when the w88 register must be released, or how the due date is to be established – this cannot be later than the completion date of your obligations.
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the procedures to be followed before the head contractor can use the retention w88 register to remedy any defects in your obligations under the contract.
If any prohibited provisions are included in the contract, these will not be enforceable. This includes making payment of retention w88 register (or the timing of such payment) conditional on anything other than you completing all your obligations under the contract. The contract also can’t require you to pay any administration fees or costs associated with retention w88 register.
It’s also important to note that the release of w88 register should only be based on your own contractual obligations. In August 2024, the High Court found that certain provisions of subcontracts which stated retentions would be released on practical completion of the head contract – where work was dependent on the work of other subcontractors’ work being completed – breached the Act.
What you should expect to receive
A head contractor can’t just take your w88 register and hang onto it, there are specific rules about how they hold the w88 register and reporting you can expect. First of all, the w88 register must be held in trust – this means it can’t be used as working capital or cashflow and is protected if the holder becomes insolvent.
If you have retention w88 register held as part of a contract, you should expect a statement at least once every three months which includes:
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the total amount of retention w88 register being withheld in each contract.
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the date and amount of each transaction into and out of the bank account, and the contract to which it relates.
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full details of the bank account in which the w88 register is being held, including name of bank, branch, account name and account number.
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all sources of security if retention w88 register has been secured by more than one complying bank accounts or instruments. how each retention w88 register account balance is secured.
They cannot charge you for this information, and three months is only the minimum frequency - you can ask for reporting at any time.
If you have retention w88 register held as part of a contract, you should expect a statement at least once every three months
If things go wrong
The Construction Contracts Act has been strengthened in recent years and provides more protection than ever for retention w88 register. If there are concerns about the performance of your obligations under a contract, you must receive 10 days advanced notice in writing to give you the chance to remedy any defects before w88 register can be taken. Then, w88 register can only be taken to remedy those defects in accordance with the contract you’ve agreed to.
MBIE hold the responsibility to monitor compliance. Get in touch if you have concerns about how your retention w88 register is being held or used.
In case of receivership or liquidation
Good news – if worst comes to worst and a contractor you have a commercial contract with goes into receivership or liquidation, your retention w88 register is protected and will not be available to the receiver, liquidator or other appointed agent to pay their debts.
The receiver or liquidator will notify you of their appointment within 10 working days and be responsible for managing or distributing the w88 register based on your original contract and any further commercial negotiations.