Update on construction contracts retention regime
In our Spring 2021 edition, we discussed the proposed changes to the retention money regime for construction contracts in light of the introduction of the Construction Contracts (Retention Money) Amendment Bill.
The legislation was passed on 5 April 2023 and it comes into force on 5 October 2023. In brief, the Act will require contractors to place retentions in a trust account with a registered bank in New Zealand (or other accepted form) and keep it separate from other money or assets.
All construction contracts entered into or renewed from that date onwards will be subject to the new requirements.
For more information about how the new legislation will work, please be in touch.
New obligations for businesses offering Buy Now Pay Later
The government recently announced it will introduce new regulations to extend the consumer protections in the Credit Contracts and Consumer Finance Act 2003 (CCCFA) to apply to Buy Now Pay Later (BNPL) schemes.
BNPL provides consumers with interest-free credit to buy goods and services and pay for them later. Consumer advocates have raised concerns that BNPL is ‘easy money’, which leads to vulnerable consumers taking on more debt than they can afford to pay back.
The CCCFA imposes certain obligations on lenders to protect borrowers. It does not, however, currently apply to BNPL.
While the new regulations are not yet finalised, it is expected that obligations for businesses offering BNPL will include:
- Only charging reasonable default fees
- Varying repayments on request when a consumer suffers unforeseen hardship
- Offering financial mentoring services to consumers who miss payments, and
- Being a member of an external dispute resolution scheme.
The new regulations are expected to be introduced to Parliament later this year.
Large businesses may need to disclose payment practices
The Business Payment Practices Bill is currently being considered by Parliament and, if passed, will require large businesses to publicly report on their payment practices.
As currently drafted, the proposed legislation will require businesses with more than $33 million (including GST) in revenue for two or more consecutive accounting periods to report six-monthly on their payment practices on both a public register and on their own websites.
Information required to be disclosed will include time taken to pay invoices and the proportion of invoices paid in full. If businesses do not comply with the reporting requirements, they could face fines of up to $500,000.
The purpose of the Bill is to improve transparency for business-to-business payment practices and provide small businesses with information to help with making decisions when engaging with large businesses. The Bill also encourages large businesses to improve their payment practices given its transparent nature.
The Bill is currently awaiting its second reading so there may be some changes before being passed into law. We will keep you up to date with its progress.
Are your T&Cs unfair?
The Commerce Commission has filed proceedings in the High Court against holiday home company Bachcare Limited. It alleges that some of Bachcare’s contract terms with consumers are unfair under the Fair Trading Act 1986 (FTA).
The Bachcare contract terms in question are:
- Regardless of how far in advance a guest cancels their booking the guest may lose up to 100% of the amount paid
- Service fees are deducted regardless of whether the booking is cancelled by Bachcare or the guest, and
- Where a booking is cancelled due to an uncontrollable event, such as an extreme weather event, and is unable to be re-scheduled, a guest could lose 100% of the amount paid.
Since 2022, the unfair contract terms regime has applied to contracts between businesses that have a trading relationship with an annual value of $250,000 or less (known as ‘small trade contracts’). The Commerce Commission appears to be increasing enforcement efforts now the regime has been in force for some time.
If you have not already done so, now is a good time to review your consumer terms and conditions, and small trade contracts to ensure they comply with the FTA.
Please contact us if you need help with unfair contract terms.