New Zealand liquidated 768 building and construction firms in the year to March 2026, close to a third of every company failure recorded across the economy, according to credit bureau Centrix. Company failures overall are running at their highest level since 2010, and construction is the single biggest source of them. For a subcontractor or supplier, the risk in those numbers is not abstract. When a firm above you in the chain goes down, the money you are owed is what you stand to lose, and the retention held against your work is often the largest single slice of it.
That slice carries more protection than it did two years ago. The Construction Contracts (Retention Money) Amendment Act 2023 came into force on 5 October 2023, and it changed how retentions have to be handled on commercial contracts signed or renewed after that date. Retention money is now held on trust automatically, the moment it is withheld. The party holding it does not have to actively set up a trust, and it cannot quietly use the money as working capital. It has to sit in a separate, identifiable bank account or an equivalent complying instrument, and it has to stay there until it is released to you or properly applied.
The point of the trust is what happens when the holder fails. Money held correctly on trust is not part of the failed company’s general pool, so it should not be swept up and shared among all creditors the way retentions were lost in the Mainzeal and Ebert collapses. The Act also puts obligations on the people running the company. You are entitled to a statement about your retention money at least every three months, the records have to be kept properly, and directors can be held personally responsible, with offences and penalties attached for getting it wrong.
There is a simple test in that for any subcontractor. If the retention statements are not arriving, something is wrong. A head contractor that cannot tell you where your retention money is being held, or that goes quiet when you ask, is either in breach of the Act or in financial trouble, and often both at once. The quarterly statement you are owed is an early-warning system as much as a compliance document, so read it and chase it the moment it is late.
Retentions are only part of the money in play. The Construction Contracts Act 2002 gives every payment claim real teeth, and too many firms leave that power on the table. Serve a valid payment claim and the payer has a set window to reply with a payment schedule. If it does not respond in time, the full amount you claimed becomes a debt due, and you can recover it as one. Push further and you can suspend work for non-payment on proper notice, and you can take a disputed claim to adjudication, a fast and binding process that does not need a courtroom or a lawyer on a retainer. None of it helps if you sit on an unpaid claim for months hoping the relationship carries you through. The firms that come out of a head contractor’s failure in one piece are usually the ones that invoiced on time, followed the process to the letter, and acted on the first missed payment rather than the fifth.
The best protection is not needing any of that. Before you commit to a large subcontract, look hard at who you are relying on to pay you. Slow payments, part-payments, requests to hold off invoicing until next month, and a stack of quietly disputed claims are the signals that a head contractor is running out of road. A credit check costs almost nothing against the exposure of an unpaid variation on a major job, and asking early how and where your retentions will be held tells you plenty about how the firm runs its books.
The pipeline is consolidating into fewer, larger, government and infrastructure-led jobs, which means more subcontractors leaning on a smaller number of big head contractors and consortiums. That concentration raises the stakes on getting the paperwork right. The law now protects your retention money and backs your right to be paid, but only if you hold the statements, serve the claims, and move the moment the numbers stop adding up. The work is coming back. Make sure you are paid for it.
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