NZ Construction Retentions — Know Your Rights
Retentions are a percentage of each progress payment withheld by head contractors (or principals) as security against defective work. They're one of the most common sources of payment disputes in NZ construction.
The Legal Framework
The Construction Contracts Act 2002 governs payment in NZ construction. Key rules for retentions:
Maximum retention rate: 10% — no contract can legally hold more than 10% in retentions.
Release schedule — most contracts release 50% of retentions at practical completion and the remaining 50% at the end of the defects liability period (DLP).
Trust accounts — under the 2015 amendments, retentions of $20,000 or more must be held in a separate trust account by the head contractor. As a subcontractor, you have the right to request evidence of this in writing.
Common Retention Mistakes Tradies Make
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Not tracking retention amounts — on a large project, retained amounts can reach tens of thousands. Always track what's owed.
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Missing the final release date — set a calendar reminder for the end of the DLP. Head contractors won't always prompt you.
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Not asking for trust account evidence — if your retention is over $20,000, it's your legal right to see proof of the trust account.
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Accepting retention clauses over 10% — any clause requiring more than 10% retention is unenforceable under the Construction Contracts Act.
If Retentions Aren't Released
If a head contractor won't release retentions after the DLP ends, you can apply for adjudication under the Construction Contracts Act. This is faster and cheaper than litigation and is specifically designed for payment disputes in construction.
See our unpaid invoices guide for the full process.