Changes to the Construction Contracts Act

Litigation

For those involved in the construction industry there are soon to be some changes to the law relating to construction contracts. The Construction Contracts Amendment Bill, which has been a work in progress for some years, is poised to come into force from 1 July 2015.

So what are the key changes that you need to know about?

  • Previously the Act applied only to physical construction work. The Bill widens the definition of construction work to include contracts with designers, engineers and quantity surveyors as from 31 March 2016. It will be critical for anyone involved in those industries to ensure that they are prepared for the changes.
  • The Bill proposes to abolish almost entirely the present distinction between residential and commercial construction contracts. One of the flow on effects of this will be to enable contractors under residential construction contracts to enforce their rights by suspending work for non-payment.
  • Another major change in the new Act relates to retentions. It is proposed that a party holding retention money will have to hold it on trust for the party from whom it is deducted (for example, held on trust by the head contractor for a subcontractor). The funds do not have to be held in a separate bank account but the retention money will not be available for payments of debts of any other creditor.

What you need to do

If you are involved in the construction industry, whether as a construction professional, property owner or developer, you should ensure that you are familiar with changes to the Act.  You will need to take steps to update your documentation and processes before the new Act comes in.

Please feel free to contact any of the members of our construction team for specialist advice and assistance with any construction related matters.

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