A Practical Guide to the new CCA Retentions Regime – how will it affect me?

Retentions Money Regime White Associates

In this article we highlight the implications for Financiers, Principals, Developers, Contractors and Subcontractors.

The Construction Contracts (Retentions Money) Amendment Act 2023 (“CCA”) comes into force next week on 5 October 2023, and with it, a myriad of changes affecting the way in which retentions should be held and managed on commercial construction contracts [1].  It will apply to contracts entered into after this date, and contracts entered into before this date and renewed thereafter.

This is the second article in our series in which we shed light on the new regulations and how they impact you.  Whether you are a Principal, Contractor, Subcontractor, Developer or Financier; whether you hold retentions, or retentions are withheld from you; this guide aims to highlight the most important changes to the Act, and practical steps you can take to help you meet your obligations and avoid the pitfalls of the revised CCA regime.


Parties A and Parties B – which one am I?

The rule of thumb is that Party A holds retentions and Party B has retentions withheld from them.

Therefore, if you are a main contractor, you will be both Party B – in respect of the head construction contact, and Party A in respect of any sub-contract retentions.


If you are a:

  • Principal
  • Developer
  • Head Contractor (holding retentions for a Subcontractor)

You are Party A.

  • To withhold a portion of money from Party B in each progress payment claim (assuming this is permitted by the specific contract) [2].


  • To utilise retention monies to rectify defects and/or non-performance by Party B – if necessary and once the necessary preconditions have been met.


  • To keep any interest earned on retention monies.


[2] However, the retention regime will apply even where money is withheld as security for the performance of contractual obligations, even where the contract does not allow retention money to be withheld.  A Principal’s deduction, or funds held by a 3rd party in escrow, are both considered retention monies.

You must:

  • Keep retention monies separate.
    • They are held on trust and cannot be mixed with any other funds. However, you can hold retentions from multiple different projects and parties in the same account [3].


  • Report on retention monies regularly.
    • A retention report must be provided to Party B after every retention money transaction, every 3 months minimum thereafter, and upon reasonable request [4].
    • The report must include:
      • The bank name, branch, account name and number.
      • The total amount of retentions held on behalf of that Party B.
      • The contract(s) to which the retentions relate.
      • Date(s) and time(s) of any transactions.
      • A statement that Party B may inspect the retention accounts and records.


  • Release retention monies – this should occur once Party B has completed its contractual obligations. The due date for the payment of retentions cannot be later than date of completion of contract obligations.


  • Use retention monies – to remedy defects as long as:
    • Use of the retentions for that purpose is permitted under the contract.
    • The relevant contractual provisions are complied with.
    • At least 10 working days’ notice is given to Party B of its non-performance and Party A’s intention to use retentions, prior to using the retentions.


[3] A trust is automatically formed as soon as monies are withheld.  The retentions are trust property.  Party A is the trustee, and Party B is the beneficiary.

[4] Full and complete accounts / records must be kept, the cost of which is not recoverable by Party A.

  • Educate directors and staff – to ensure everyone understands the roles and responsibilities, from directors to administrators.


  • Ensure that effective internal accounting policies and procedures are in place – directors have a legal duty to ensure their companies are abiding by the retention money regime.


  • Open a dedicated “Retentions” bank account – for the sole purpose of holding retentions.


  • Develop a naming protocol – A simple coding system will ensure you can quickly and easily identify each project, retention type value and entity, and report on it to the relevant Party B.


  • Update your monthly payment schedule / certificate template – This will simplify the reporting process by including retention money reporting in a standardised format.


  • Contractual – Ensure that contractual provisions including relevant notice requirements are adhered to. Terms making payment of retentions, or due date for payment, conditional on anything but Party B’s performance of its contract obligations are ‘prohibited provisions’.
  • Retention monies are held on trust – It is not your money, and you must not mix it with money in your own accounts and/or use it in any way.


  • Retentions monies must not be used as working capital.


  • In the event of receivership or liquidation – the receiver or liquidator will step into your shoes, automatically becoming Party A and the new trustee of the retention monies.


  • Non-compliance is expensive – The new Act outlines significant penalties including fines between $50,000 – $200,000 which can be enforced against both your company and individual directors.


  • Demonstrating compliance may become a condition of funding (banks and financiers)


  • Ensure that the contract entered into contains adequate procedures and criteria for dealing with retentions. Also note – a contract must not contain provisions which attempt to avoid the retention money regime.

If you are a:

  • Head Contractor (having retentions held from you by a Principal or Developer)
  • Subcontractor

You are Party B.

As Party B you are entitled to:

  • Receive regular reporting – in respect of all retention monies held by Party A on trust for you. Reporting must be in the correct format and contain all the information specified under the Act – at least once every three months and until Party A’s obligations as trustee of the retention money trust have ended. [as per Party A description above]


  • Make reasonable requests to inspect – Party A is obliged to show you the account(s) and records pertaining to your retention monies. [note reluctance due to commercial factors, however, this is your right]


  • At least 10 working days’ written notice – before Party A uses retention monies to rectify any non-performance or defect.


  • Be paid out retention monies – once all your contractual obligations have been completed and any other pre-conditions for release have been met. Interest is payable on late release of retentions.


  • Report non-compliance – The Act is administered by the Chief Executive of the Ministry of Business, Innovation and Employment (MBIE). You can raise any concerns about Party A’s compliance (or lack thereof) by emailing CCRMComplaints@mbie.govt.nz .
  • To promptly rectify any defects and non-performance in the contract works.


  • Monitor retention holder’s compliance with the CCA and report any breaches thereof.
  • Retentions owed but unpaid retain the status of “retention monies”. Your retentions are now protected in the event of Party A’s receivership or liquidation.  Bear in mind, this form of security associated with retentions, applies even under circumstances where amounts have been certified as debt due but not yet paid.


  • Ensure that the contract entered into contains adequate procedures and criteria for dealing with retentions [5].


[5] Section 18I – CCA (Retention Money) Act states that provisions in a contract which purport to change the conditions on which retentions are released, and/or avoid the application of this section shall be void.

If you are a Financier:

  • Make CCA compliance a condition of funding – statutory compliance, in all respects.


  • Ensure borrowers’ construction contracts contain appropriate retention provisions.


  • Make regular reasonable requests for documentation demonstrating compliance – ideally on a monthly basis, and in any event prior to any draw down of funds. Financiers should verify compliance in relation to the retentions borrowers hold for contractors as well as the retentions contractors are holding for their subcontractors.


  • Ensure that retention funds are not considered assets or equity and/or used as security for funding.
  • Not to include retention funds in my assessment of my client’s financial position.


  • Report non-compliance of retention holders.
  • Compliance with the CCA can be a condition of funding; however, financiers need to take care not to be construed as a “constructive trustee” and consequently become responsible for management or compliance with the retention monies regime. In order to avoid this situation, borrowers should draw down retention amounts progressively and not leave it to be drawn down as a lump sum when retentions are due to be paid to the contractor.

Next month we will discuss the alternative mechanisms – known as Complying Instruments – available to manage risk and performance under commercial construction contracts.


Further Guidance

If you require further guidance, please feel free to contact our Advisory division leads.


Further Resources


For the relevant legislation:


[1] This guidance does not apply to a construction contract with a residential occupier.


Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.  It is current as at the date of publication only. 


This article was contributed by Rebecca Ward and Jesse Conradie.