Subbies to get better payment protection
07 Oct 2014, Featured, Industry Updates
Change in law intended to prevent another Mainzeal-type fallout
Changes to the Construction Contracts Acts (CCA), requiring subcontractors’ retention payments to be held in trust, are expected to be made law before Christmas.
Specialist Trade Contractors Federation President Graham Burke said that Building and Construction Minister Nick Smith had indicated the CCA Amendment Bill should be passed by the house before Christmas, and that the industry would be given ‘lead in time’ to adjust to the new requirements.
The changes are being made in response to the 2013 Mainzeal collapse, when a myriad of subcontractors were left $18 million out of pocket.
Mr Burke said that under the new law, the money owed to subcontractors by Mainzeal would have been held in trust and wouldn’t have been available to pay back secured creditors and the liquidator.
Retentions are payments held back by developers and main contractors to ensure any repairs or faulty work can be put right.
“These changes are to stop developers and main contractors from using retention money indiscriminately. The money must be kept separate from other funds, be traceable and be protected,” said Mr Burke. “This will make it more difficult for developers or contractors to operate without appropriate levels of working capital.”
He said the policy is well supported by the industry, because it keeps compliance costs to a minimum.
“It also recognises the vast majority of industry players are honest and also states there will be penalties for those who do not comply. We believe these should have enough teeth to discourage those who are tempted to use retention money recklessly.”
Register to earn LBP Points Sign in
1 Comment
Leave a Reply
You must be logged in to post a comment.
In the past retention payments were for the workers of the sub contractor, if that contractor were to go bust, them their was money in the kitty to pay his workers, it was never to be used for faulty work that was to be put right, that was brought in by main contractors as an excuse not to pay out what was owning at the time of first, second, and third invoice, when work was completed by subcontractor to a very good standard they still weren’t paid out that retention, if you are a LBP why should their be retentions in contract anyway, the introduction of the LBP was to get rid of bad builders and to get rid of all the regulation and the bureaucracy, or am i completely wrong !!!