Amendments to the Construction Contracts Act passed in
Parliament yesterday. These changes will affect everyone in the
construction industry, from principals to head contractors,
subcontractors, architects, engineers and quantity surveyors.
Key changes being brought into effect are:
From 1 December 2015, most distinctions under
the Act relating to different treatment of residential and
commercial construction contracts will be removed, and changes to
the adjudication process under the Act come into effect.
From 1 September 2016, design, engineering and
quantity surveying work will be covered by the Act.
From 31 March 2017, new rules around holding
retention payments on trust will come into force.
Removing the distinctions between residential and commercial
construction contracts from 1 December this year will give greater
rights to builders and subtrades operating in the residential
sector to be paid when due, provided they take steps to bring
themselves within the operation of the Act.
The adjudication changes are intended to streamline the process,
and to assist adjudicators in avoiding 'ambush'
claims. Whether this works as intended will remain to be
A very significant change is the bringing of design, engineering
and quantity surveying services under the Act. Professionals
operating in those industries will, from 1 September 2016, have the
same rights in respect of payments as contractors, but will be
restricted from including 'pay when paid' clauses in any
agreements with subconsultants. Those professionals (and
their insurers) will also need to be aware of the extremely tight
timeframes for adjudication under the Act.
The retention trust requirement has been the most publicised
aspect of the changes. While the changes go some way towards
protecting retention payments, subcontractors should be aware that
there are limitations to the protections offered by this trust
structure, as the money is still held by the head contractor
company. Head contractors and principals should obtain advice
on this structure, however, as they will be taking on the fiduciary
obligations of a trustee, which could impose greater obligations
than may appear to be the case from the legislation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Be aware that most modern subdivisions now include land covenants which are registered against the titles.
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