The construction industry is an ever changing beast, and the latest change to the Construction Contracts Act 2002 (CCA) follows a comprehensive review of the industry and the CCA which facilitates many aspects of construction contracts. The change alters and adds key provisions to the CCA, and will be implemented in three stages, namely on 1 December 2015, 1 September 2016, and 31 March 2017.
Stage 1 – 1 December 2015. Previously if a matter was referred to adjudication only payment dispute determinations could be enforced via Court. However as of 1 December 2015 enforceability was extended to include rights and obligations determinations too. For example the issue of whether work is defective, or a party’s claim/work is within the scope of the variation, is now enforceable.
Additionally, as of 1 December 2015 the distinction between residential and commercial construction contracts is largely removed – for example the difference between progress payment provisions has been removed, and any payment claims must be accompanied by a prescribed form that outlines the payment process.
Stage 2 – 1 September 2016. From this date the definition of “construction work” will be extended to include the work of Architects, Engineers and Quantity Surveyors. This change will allow these parties to access the payment process and the protection it affords. However, the changes also mean that these parties could be the subject to the adjudication process as a claimant or respondent.
Stage 3 – 31 March 2017. From this date the new retentions trust scheme comes into force, which will only apply to commercial contracts over a certain value, and the parties cannot contract out of this requirement. Essentially this will require the payer to hold retentions on trust for the payee.
The purpose of the new trust requirement is to provide greater certainty of payment for contractors and subcontractors owed retention money for work completed, and to ensure that any money held is managed responsibly. In the event that money is not managed responsibly, and obligations are breached, directors could be implicated personally and penalised accordingly.
We recommend that those businesses in the construction industry become familiar with the changes to the CCA, and contact James Hakaria for further advice.