National | Building

'Subbies' get ‘trust account’ safeguard they’ll get paid if construction company fails

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Head contractors that hold onto money for mahi done by 'subbies' will have to keep that pūtea on trust in a separate bank account, under changes passed into law to safeguard subcontractors if the business fails.

Minister for Building and Construction Megan Woods says subcontractors are often the first to miss out if a construction company becomes insolvent.

“The changes made today provide important protections for subcontractors so they can be certain their payment is kept safe, can’t be used for any other purpose, and will be paid out should the head contractor’s business fail.”

Many head contractors choose to withhold part of their payment to specialist tradespeople for up to 12 months.

"This is one way to help ensure building work is done right first time, and acts as an insurance that the subcontractor will return if there are any defects."

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

Information about the retention money held must be reported to subcontractors on a regular basis, at least once every three months.

Directors will face fines of up to $50,000 and companies $200,000 for breaches of the strict liability requirement.

It will also be an offence to intentionally provide false information about retentions money held for a subcontractor, with a fine of up to $50,000 for each breach.

Further penalties will be incurred if head contractors fail to provide the Ministry of Business, Innovation and Employment with information necessary to support investigations.

“Everyone should have the confidence they will be paid for their work. The changes announced today ensure that there are strict penalties in place for companies who fail to meet their obligations to those who carry out work for them.”