Law change aimed at building disputes

Amendments to the Construction Contracts Act are due to be passed in Parliament soon and to come into effect from July 1.

Peter Degerholm, a Wellington-based dispute resolution consultant and construction expert closely involved with the original act, backed the changes to the law, intended to help resolve building disputes and fights over money.

The changes will affect homeowners and their relationships with builders and other consultants, as well as those working in the commercial building sphere.

"The main changes are technical, to make the payments and adjudication process more effective," Degerholm said.

This was needed because some adverse decisions from the courts meant elements of the act were not entirely clear or adjudication had not worked as well as intended.

However, the changes will also draw in many other people in the construction sector.

The bill would also extend the coverage of the act from March 2016 to designers, engineers and quantity surveyors - over the objections of architects and engineers, Degerholm said.

The changes would make these professionals more accountable to consumers.

"The bill is still at committee stage but is expected to be passed shortly in view of the proposed effective date of July 1."

But one of the biggest changes was over retentions - a percentage of the money withheld during work to ensure defects are fixed, if they arise.

From March next year, retentions will have the status of being held in trust.

"That means that if a company goes into liquidation, retention money withheld is protected so the liquidator would not have access to it other than for remedying defects," Degerholm said.

"When Mainzeal collapsed, it highlighted a problem. Mainzeal had retentions withheld from them but they in turn were holding about $19 million from subcontractors, performed some time ago.

"So it was regarded as money which should have been paid to the subcontractors and not used as working capital by Mainzeal."

Source - NZ Herald