On 21 November 2018, the New South Wales government passed the amendments to the Building and Construction Industry Security of Payment Act. However, the commencement of this Act is yet to be announced but will expect to take effect this year.
Contracts Specialist can explain to you the highlight of the changes.
Even though the amendments are not yet in effect, it is expected to commence some time this year. The key 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 served by subbies are now due and payable no later than 20 business days (currently 30 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.
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. And head contractors and principals will no longer be able to terminate construction contracts before the final payment claim reference date is served.
An adjudication is, firstly, not a court process. Rather, it is a quicker method in resolving disputes than a lengthy and costly court process where an adjudicator is appointed to settle the dispute. It is a procedure for resolving disputes 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.
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. Failing to provide a supporting statement and a payment claim will now have a maximum penalty of $110,000 for corporations.
A maximum of 1000 penalty units for corporations and 200 penalty units for an individual. These are different to the old penalties which impose a maximum of 200 penalty units for any party.
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 – 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.