Construction Contracts Amendment Bill passed
Date: 29 October 2015
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 seen.
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.
Original article by Karen Overend, taken from http://www.mondaq.com/article.asp?articleid=438320&email_access=on