On 21 October 2019, the amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) have taken effect.
Contracts Specialist can explain to you the highlight of the changes.
The key changes are only applicable to construction contracts entered into on or after 21 October 2019. These changes in this round of amendments are as follows:
These are the important notes tradespeople should remember.
In the Security of Payment Act, contractors and subcontractors should be given progress payments by issuing a document called a Payment Claim to make sure that they are deservedly paid for their construction services. The contractor becomes the claimant, while the client becomes the respondent.
The Act reinserts the requirement that a payment claim must include a statement that it is made under it. Payment claims that are not expressly referencing the Security of Payment Act are invalid.
Only one payment claim may be served per month of work unless the contract allows for more frequent payment claims.
A payment claim can be for more than one progress payment and can include previously claimed amounts. It can also include works completed in earlier months but were not claimed yet.
Payment claims served by subcontractors are now due and payable by no later than 20 business days starting from the date that the claims are made. This period can be reduced but not extended by the terms of a construction contract. Note that this is a statutory maximum.
The concept of “reference dates” has been entirely removed from the legislation and instead a payment claim may be served on and from the last day of the “named month”. This is changed to remove and avoid technical disputes around the age-old debate on using up reference dates and to ensure the claimants have a specific date every month to submit their claims.
The parties can agree in the contract a specified date for the service of payment claim ahead of the named month. It just means that the claimant can submit a payment claim as early as the agreed date.
Claimants will now be able to serve statutory payment claims after terminating a construction contract. The contractors will have an express right to make a claim under the Security of Payment Act.
An adjudication is, firstly, not a court process. Rather, it is a quicker method in resolving disputes where an adjudicator is appointed to settle the dispute without resorting to lengthy and expensive court procedure.
A claimant now has the right to withdraw an adjudication application from any point before it is determined unless the respondent objects to the withdrawal and the adjudicator determines that the application should still proceed.
The adjudicator’s response to an adjudication application has also been reduced. Adjudicators will have 10 business days to make a determination after receiving the application.
This is different from the current Act, where adjudicators have to first notify the parties of their acceptance of the application and then wait for 10 days.
The Act gives the court an express right to set aside an adjudication determination for the jurisdictional error. If only part of a determination is affected by jurisdictional error, the court may set aside that part only, while confirming the balance of the determination.
The amendments also increase the penalties for a range of offences under the Security of Payment Act specifically for corporate offenders.
A maximum of 1000 penalty units for corporations and 200 penalty units for an individual. These are different from the old penalties which impose a maximum of 200 penalty units for any party.
This means failing to provide a supporting statement and a payment claim will now have a maximum penalty of $110,000 for corporations and $22,000 for individuals.
Remember that these changes are not yet in effect, but are expected to commence this year, 2019. We still have to wait for the exact effectivity date.
The mentioned are the overviews of the upcoming changes in the NSW Security of Payment. However, the key details that will be contained in the regulations are yet to be released.
The construction law doesn’t stay as it is. Legislators will always create amendments to improve the current construction frameworks.
Consulting with a construction lawyer can help you understand the changes to one of the significant acts in the NSW building and construction industry – the Security of Payment Act.
Contracts Specialist can guide you and your construction business to be compliant with the new changes. Our principal lawyer, John Dela Cruz, can explain to you the important points in a way you can fully understand. With his more than 10 years experience in handling construction matters, you can be confident you are getting the right advice.