Plumbing businesses will have greater financial protection in the event of a construction company collapse following new legislation announced by the government today.

Master Plumbers, Gasfitters & Drainlayers NZ welcomes the passing of the Construction Contracts (Retention Money) Amendment Act, which will provide vital protections for subcontractors.

Master Plumbers CEO Greg Wallace says Master Plumbers has advocated for some time now for a change to the retention regime, which can leave plumbing subcontractors seriously out of pocket if a head contractor’s business fails.

“This new legislation is a significant step in the right direction and we are pleased the government has listened,” says Wallace.

Companies and directors who choose to hold retention money against subcontractors will now be required to hold retention money on trust in a separate bank account, which is unable to be mixed with other company money or assets.

Information about the retention money held must be reported to subcontractors on a regular basis, at least once every three months. Companies who fail to meet their obligations to subcontractors will face strict penalties, including fines of up to $200,000.

The changes to the retention money regime will apply to new commercial construction contracts and existing contracts if they are amended from six months after the Act is passed.

“Master Plumbers has always said we want any retention money held by main contractors to be fully protected,” says Wallace. “The new legislation will enforce this and the fines are substantial for company directors who fail to comply.

As things stand, main contractors can choose to remove retentions altogether and Master Plumbers supports this as the best process.

However, where retentions are applied, the new legislation will give subcontractors stronger protection, says Wallace.

“Many of our members are small operators, who are at major risk of folding if a big construction company goes under.

“This legislative change is good news for their businesses and good news for all New Zealanders, as it brings greater security and stability to the construction sector.”

Read the Beehive media release HERE