Sub-Contractors Welcome Greater Protection from Collapsed Construction Companies

20 October 2015

OCTOBER 20 2015



Sub-contractors today welcomed the Government changing the law to help protect them in the event of a construction company collapse.

The Government has passed a measure that means money owned to sub-contractors will be deemed to be held in trust and be unable to be scooped up by banks or receivers if a

developer or main contractor runs into financial trouble. 

Sub-contractors lost over $18 million in retention payments owed to them following the collapse of Mainzeal. The retention payment system allows the main contractor or developer to hold up to 10 per cent of the sum due to a sub-contractor, interest free, for up to two years as a guarantee of the quality of the work.

Graham Burke, president of the STCF, which represents more than 5,700 contracting firms in New Zealand, said the passing of the Construction Contracts Amendment Bill was good news for sub-contractors.

“This decision means a great deal to thousands of sub-contractors who can be more confident that if a construction company fails, they will receive the retention money owed to them.

“The Federation welcomes the pragmatic and reasonable solution from the Government, particularly in light of the surge in construction activity, especially in Auckland and Christchurch.

“During economic upswings, firms often grow rapidly to meet demand and may over-extend themselves. If they are up to their borrowing limit with the bank, then there is the opportunity to use the retention payments they are holding as working capital. If the company fails, historically those retentions have been used to pay the liquidator and secured creditors such as the bank or IRD.

“We are very pleased that the amendment has placed a legal obligation on developers and main contractors to protect retention payments which belong to sub-contractors”.


For more information, please contact:

Graham Burke

President, Specialist Trade Contractors Federation

021 249 3459