How does retention money work under New Zealand's Construction Contracts Act?
Retention money under New Zealand's Construction Contracts Act 2002 is held on trust in a complying account, with a ledger kept for each party. The payer reports the money held every 3 months, and gives 10 working days notice before using it to remedy a defect. The amended rules apply to contracts entered into or renewed after 5 October 2023.
The duties, in the library's order
| Duty | Window and section | If missed |
|---|---|---|
| Determine which retention regime applies to the contract | none setSch 1 cl 1 | no penalty statedDisputes |
| Keep the retention trust account in the status the Act requires | none sets 18B(2)-(6), 18C | no penalty statedDisputes |
| Hold retention money in a complying trust account | none sets 18D, 18E, 18FB, 18DA | an offenceLapsed compliance |
| Maintain a ledger of the retention trust account | none sets 18E(4)-(6), 18EA | no penalty statedDisputes |
| Report the retention money held every 3 months | 3 monthss 18FD | an offenceLapsed compliance |
| Give the retention trust account records to whoever the Act names | none sets 18FC | an offenceLapsed compliance |
| Notify use of retention for a defect within 10 working days | 10 working dayss 18C(3)(c), 18DA(3) | the claim is barredDisputes |
| Release retention on the terms the Act sets | none sets 18I, 18G | no penalty statedDisputes |
What the library notes on each duty
Quoted a whole sentence at a time from the library's note on each row.
Determine which retention regime applies to the contract
Sch 1 cl 1 · none set · no penalty stated
Keep the retention trust account in the status the Act requires
s 18B(2)-(6), 18C · none set · no penalty stated
- Retention becomes trust property when the contract allows it to be withheld, whether or not actually withheld; if the contract has no term, when it is actually withheld.
Hold retention money in a complying trust account
s 18D, 18E, 18FB, 18DA · none set · an offence
- As soon as practicable, held at a registered NZ bank, retention money only, with the bank told it is trust money (or a complying instrument).
- Offence up to $200,000 (party A) / $50,000 per director, with a reasonable-steps defence.
Maintain a ledger of the retention trust account
s 18E(4)-(6), 18EA · none set · no penalty stated
- A ledger per party B per contract; every payment in or out recorded.
- Unallocated movements are shared pro rata.
Report the retention money held every 3 months
s 18FD · 3 months · an offence
- As soon as practicable after money becomes retention money, then at least once every 3 months until the trust ends.
- Offence up to $50,000.
Give the retention trust account records to whoever the Act names
s 18FC · none set · an offence
- Party B may inspect the records 'at all reasonable times', free of charge.
- Offence up to $50,000.
Notify use of retention for a defect within 10 working days
s 18C(3)(c), 18DA(3) · 10 working days · the claim is barred
- Written notice naming the defects, at least 10 WD before using retention to remedy them; the contract must permit it.
Release retention on the terms the Act sets
s 18I, 18G · none set · no penalty stated
- A term delaying release beyond performance, adding conditions or charging fees is void; interest runs from the payable date.
What this page is, and is not
It is the section text this library holds for New Zealand's Construction Contracts Act 2002 (NZ), NZS 3910:2013 and Health and Safety at Work Act 2015, with the window and the consequence. The NZS 3910:2023 rows are read from secondary summaries of the draft, not the published text. It is not legal advice, and it is not a substitute for reading the Acts, the contract you signed and any special conditions.
These pages set out the duties the library holds for a New Zealand job.
No library of law is complete, and Demiton never says this one is. An obligation the library does not hold, and you did not add, is not protected. You can add your own to any job.