2014 Security of Payment Act Amendments – What’s New?

Building & Construction Law 22/04/2014 by Sam Roberts

The Building and Construction Industry Security of Payment Amendment Act (NSW) 2013 (‘the Amendment Act‘) contains important amendments to the Building and Construction Industry Security of Payment Act (NSW) 1999 (‘the Act‘).

The Amendment Act will apply to all Construction Contracts entered into from 21 April 2014.

Summary of Key Amendments

The key amendments are:

Introduction of Maximum Time Limits

Before the changes, the Due Date for payment under the Act was:

  • On the date on which the payment becomes due and payable in accordance with the terms of the Construction Contract, or
  • If the Construction Contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made.

The Amendment Act has introduced maximum time periods for the payment of progress claims. The maximum time periods are:

  • 15 business days from the date of making the claim for payments by a Principal to a Head Contractor, and
  • 30 business days from the date of making the claim for payments to a Subcontractor.

Further:

  • The 30 day payment term for Subcontractors applies to Construction Contracts between Subcontractors,
  • A Construction Contract may provide for a Due Date for payment which is earlier than the maximum time period,
  • A Construction Contract must not contain a term which provides for a Due Date for payment outside the maximum term and, if it does, then that term is of no effect, and
  • The amendments do not apply to Subcontractor claims for payment by subcontractors in respect of residential construction contracts. The due date for payment of these claims is still:
    (a)   On the date on which the payment becomes due and payable in accordance with the terms of the Construction Contract, or(b)   If the Construction Contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made.

Removal of Endorsement Requirement

Before the changes, all Payment Claims made under the Act had to:

  • Identify the construction work (or related goods and services) to which the progress payment related,
  • Indicate the amount of the progress payment that the claimant claimed to be due, and
  • State that it was made under the Act.

The changes contained in the Amendment Act mean that when submitting a Payment Claim you no longer have to include a statement that the claim is made under the Act. However, a Payment Claim will still need to comply with the other two (2) requirements set out above.

Exception please note that the amendments will not apply to Subcontractor claims for payment in respect of certain residential Construction Contracts. These claims will still need to identify that the claim for payment is being made under the Act.

Introduction of Requirement for Supporting Statement

The Amendment Act has introduced a requirement that Head Contractors must serve a Supporting Statement declaring that all Subcontractors they have engaged have been paid what is due and payable with their Payment Claims. Where an amount which would otherwise be due and payable is in dispute that amount must be included in the Supporting Statement.

Head Contractors can opt to use the prescribed form or alternatively they may incorporate the prescribed form into their current operating procedures. To obtain a copy of the current form call and speak to me today.

Importantly, it is now an offence for a Head Contractor to serve a Payment Claim without a Supporting Statement or with a false or misleading Supporting Statement and authorised officers from the Department of Finance and Services will have authority to investigate and prosecute these offences. The maximum penalty for failing to provide a supporting statement is $22,000.00 and the maximum penalty for providing a false or misleading supporting statement is $22,000.00 or 3 months imprisonment (or both).

If you have any questions in relation to the amendments or require any assistance please do not hesitate to call me for a complementary phone consultation.

Important Disclaimer

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