Construction Contracts (Retention Money) Amendment Act 2023 (Revised Retentions Regime) – comes into force on 5 October 2023

Christine Gordon, Senior Associate at Simpson Grierson, share her insights about the changes to the Retentions regime that apply from 5 October 2023. She explores the key measures introduced by the Amendment Act, provides clarity on the new regime, and examines the implications of the Act’s provisions. Christine will also be presenting at the upcoming New Regime Under the Construction Contracts (Retention Money) Amendment Act webinar taking place next month.


The Construction Contracts (Retention Money) Amendment Act 2023 (Amendment Act) introduces measures aimed at giving greater protection over retention money than under the current retention regime in the Construction Contracts Act (CCA).

The Amendment Act comes into force on 5 October 2023 and will apply to commercial construction contracts entered into after this date (and contracts entered into before this date and renewed afterwards).

Key measures that will come into force on 5 October 2023 are:

  • Retention money is deemed to be held on trust: a party owed retention money will not have to rely on the retention holder to actively create a trust to claim an interest in the retention money.
  • Use of retention money: Retention money can be used to remedy defects caused by the other party’s failure to comply with its obligations under the construction contract (subject to the use of retention money for this purpose being permitted by the contract).
  • Separate bank account or complying instrument: All retention money needs to be held in either a separate trust account used solely for holding retention money in a NZ registered bank or in the form of a complying instrument (such as an insurance policy or bank guarantee). The retention holder must keep separate ledger accounts to identify each party and each construction contract. The bank must be notified that the funds in the account are retention money.
  • Record keeping and reporting: The party holding retentions must provide the party entitled to payment, initially and then at least once every three months, information about the retention money.
  • Penalties: Companies that fail to comply with the new retention regime face significant fines of up to $200,000 and directors can be personally fined up to $50,000 for each breach. Intentionally providing false information about retention money is an offence with fines of up to $50,000.

Parties to commercial construction contracts should ensure that they have a good understanding of, and can comply with, the new legislation when it comes into force in October. Retention holders should:

  • Discuss the requirements for holding retention funds in separate trust accounts with their banks.
  • Examine their template construction contracts and update these if they are not compliant with the requirements for reporting under the new regime. The level of information required goes well beyond what is generally recorded about retention money in a payment schedule or is commonly provided in the industry.
  • Consider what amendments are required to their construction contracts to ensure that the retention money can be used to remedy defects in performance by the other party.

Hear more from her at the New Regime Under the Construction Contracts (Retention Money) Amendment Act webinar taking place on Tuesday, 19 September 2023.

Christine has more than 12 years’ experience as a specialist construction lawyer at leading firms in New Zealand and London. Christine advises a broad range of construction parties from principals, contractors and sub-contractors to engineers, architects and insurers on issues arising both during and after construction. She has experience with New Zealand and international forms of construction contracts and consultancy services agreements. Christine’s experience extends to acting for parties in resolving complex and high value disputes through arbitration, mediation, adjudication, court, expert determination and other dispute resolution forums. Christine is a member of the Society of Construction Law and the Auckland Women Lawyers’ Association. Connect with her via LinkedIn