The Construction Contracts Amendment Act 2015 (CCAA), which passed in Parliament in October 2015, amended the Construction Contracts Act 2002. These changes took effect in three phases from 1 December 2015 and affect managing claims and payments in the construction industry. These changes will impact every building owner, homeowner, contractor and subcontractor.
On all contracts from 1 December 2015 every payment claim must include a prescribed 'notice to payer'.
The adjudication process for resolving disputes has been improved and has been extended to cover a wider range of disputes as well as it becoming easier to enforce an adjudicator’s decision.
Extension of Services
From 1 September 2016 the Act now covers architects, engineers and quantity surveyors, which means disputes about their professional services and fees can be referred to adjudication, and they can rely on the Act to recover unpaid fees or to resolve fee disputes.
The retention regime introduced under the CCAA aims to provide protection for retention money and applies to all commercial contracts renewed or entered into on or after 31 March 2017.
This new regime requires the money withheld from builders and subcontractors as security for their performance should be held on trust, and introduces penalties where retention money is not properly managed or paid out.
The Regulatory Systems (Commercial Matters) Amendment Bill (RSB) passed its final reading in Parliament on 23 March 2017 and is expected to become law before 31 March 2017.
The RSB introduces the following key changes and clarifications to the CCAA as originally passed:
· The regime only applies to retentions on contracts renewed or entered into on or after 31 March 2017
· Payers must, by default, hold retention money on trust in the form of cash or other liquid assets that are readily converted into cash, but may elect instead to obtain a “Financial instrument” or such as insurance or a payment bond to provide third-party protection
· No further regulations are proposed
NZIQS, Registered Master Builders and Specialist Trade Contractors Federation have issued some guidance notes with FAQ on the retention regime:
Our thanks to Peter Degerholm from Calderglen Associates for developing this content.
Construction Contracts Amendment Act 2015 (complete legislation).
Regulatory Systems (Commercial Matters) Amendment Bill (RSB) –a full copy of the Act will be available to download form www.legislation.govt.nz on or soon after 31 March 2017.
Kensington Swan “Site Visit” Construction Blog articles on Retentions: https://nzconstructionblog.com/2017/03/23/alternative-to-new-retentions-regime-confirmed/
Peter Degerholm, Calderglen Associates, has produced a book on the CCAA. The handbook offers:
· A view of how and why the Act works – and how to get the best out of it
· Explains the changes, and how and when to apply them
· Is a practical tool for anyone involved in the administration of contracts or in disputes, whether a subcontractor, contractor, owner or advisor
· Explores issues arising out of the extension of the Act to related services and the retention regime
Note-this handbook was written before the RSB was written regarding the detail of the retention regime. Peter will keep his website updated with information on retentions.
Contact Calderglen Associates to purchase a copy of the CCA Handbook.
NZIQS Media Releases
Opportunity for construction industry-wide collaboration as retention regime takes effect (26 February 2017)
Quantity surveyors welcome new building industry Act (21 October 2015)