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Residential Focus

24 March 2021

#Property, Planning & Development, #Construction, Infrastructure & Projects

Published by:

Ushna Bashir

Residential Focus

Owner occupier contracts now covered by the Security of Payment Act – but are you really entitled to make a payment claim?

From 1 March 2021, contracts between owner occupiers and builders are no longer exempt from the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act).

Residential builders will now be able to claim progress payments and apply for adjudication under the Security of Payment Act. It is a key requirement that a construction contract between the parties exists for an entitlement to the progress payment under the Security of Payment Act.

The Home Building Act 1989 (NSW) (Home Building Act) disentitles contravening individuals from the benefit of contractual damages or remedies and renders such contracts unenforceable if certain requirements are not met. The question then arises as to whether a builder who has contravened the Home Building Act can still utilise the Security of Payment Act.

Relevant legislation

Section 10 of the Home Building Act states that a person who fails to comply with certain requirements of the Act or Regulations is unable to enforce the contract or any damages or remedies under it. These contraventions include contracting without a license or under a contract that is not in writing or does not have a sufficient description of the work to which it relates.

The object of the Security of Payment Act is to ensure any person who undertakes construction work or services under a construction contract is entitled to progress payments. The right to progress payments is stated to apply to a party that carries out construction work or provides related goods or services under a construction contract.

A grey area then arises when a contractor seeks to make a payment claim under a contract rendered unenforceable by the Home Building Act. The Court of Appeal provides guidance on the issue.

Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421

In November 2002, Brodyn entered into a contract with Dasein for Dasein to undertake concreting work for twelve townhouses. In September 2003, Dasein served Brodyn a document claiming progress payments. Brodyn disputed Dasein’s entitlement to any payment. The payment claim was the subject of an adjudication which found in favour of the claimant, Dasein. Brodyn challenged the determination.

Brodyn submitted that because Dasein did not have a license under the Home Building Act, the contract was illegal and unenforceable and so disentitled Dasein to any progress payments. In the judgement, when considering a separate issue, Hodgson JA stated that “the existence of a construction contract between the claimant and the respondent” is an essential requirement for a valid adjudication determination.

However, later in the same judgement, Hodgson JA considered the question of whether the contractor was entitlement to payment even though unlicensed and not able to enforce the contract:

“the civil consequences for an unlicensed contractor for its breach…are those set out in section 10, and not any wider deprivation of remedies…in my opinion Dasein's failure to have a licence could not be a ground on which the adjudicator's determination could be considered void, or for otherwise giving relief in respect of the determination”.

This may seem odd and different to reconcile, but there is a suggestion that unenforceable contracts under the Home Building Act do not become void or illegal (Alexander v Gregoriou; Trimtor Building Consultants Pty Ltd v Hilton). Thus, an unenforceable contract under the Home Building Act does not necessarily mean that there is no contract for the purpose of the Security of Payment Act.

What does this mean for you?

The recent amendments mean that residential builders can now make use of the Security of Payment Act. They will not necessarily be disentitled from doing so due to a lack of complete compliance with the Home Building Act. Home owners will also not be able to dispute payment claims solely based on a lack of compliance on the part of the builder.

In essence, home owners should:

  • carry out their due diligence before entering into a contract
  • ensure that all the requirements for a contract under the Home Building Act are met
  • strictly comply with the timelines and content requirements in the Security of Payment Act for responding to payment claims if they wish to dispute a payment claim.

Where needed, legal advice should be sought to ensure compliance with the relevant legislation.

Authors: Tony Britt & Ushna Bashir

In the media

$2.4B boost to the economy as Government cuts red tape for tradespersons
The Federal Government will provide a $2.4 billion boost to the economy by cutting red tape to allow for a uniform scheme for automatic mutual recognition (AMR) of state and territory based occupational licences and registrations (18 March 2021).  More...

Deconstructing construction data
Industries such as banking, energy and telecommunications are opening access to their data under the new regime. This underscores the value and sets expectations for the accessibility of data throughout the broader economy, including the sizeable construction industry – which produces around 9 per cent of Australia’s gross domestic product (16 March 2021).  More...

Strong market confidence carries new home sales into 2021
New Home Sales increased in February 2021 to be 1.7 per cent higher than February last year, prior to the impact of COVID restrictions on new home sales,”stated HIA’s Economist. HomeBuilder was the catalyst for improving consumer confidence in the housing market (12 March 2021).  More...

Apartment made from waste glass and textiles showcases “green” ceramics
Industry leaders have had a glimpse into the future – flooring, wall tiles, kitchen and lighting features, and furniture and artworks, made from waste glass and textiles. The ‘green ceramics’, used for the first time as a construction material, are the result of a collaboration between Mirvac and the UNSW (SMaRT) (11 March 2021).  More...

Commonwealth pours $1.2 billion more into Apprenticeship Subsidy
Prime Minister Scott Morrison and Minister of Employment, Michaela Cash have announced that the Boosting Apprenticeship Commencements wage subsidy program will shift to becoming demand driven and will be expanded for a full twelve months for new apprentices and trainee places. To be eligible, employers will need to engage apprentices who will need to commence before September 30 2021 (09 March 2021).  More...

Strengthening apprentice support will strengthen economy
The announcement from the Australian Government to extend the Boosting Apprenticeship Commencements subsidy by injecting a further $1.2billion is a welcome response to HIA’s call to ensure the class of 2020 are not left behind in these difficult times,” said Kristin Brookfield, HIA Chief Executive Industry Policy (09 March 2021).  More...

Building Surveyor Integrity Goes Under Spotlight
Building surveyors will be appointed by owners only, will be prevented from having conflicts of interest and will have powers to issue stop-work and rectification orders if recommended options for regulatory reform are adopted nation-wide (09 March 2021).  More...

Trades without borders
The NSW Government is slashing red tape and removing barriers for tradies to work across state and territory borders, delivering a major boost for jobs and the economy (18 March 2021).  More...

 Roadmap to reform rolled out for infrastructure contributions
The NSW Government will undertake major reforms to the infrastructure contributions system, unlocking up to $12 billion in productivity benefits through changes to how public facilities and services are funded through the planning system (05 March 2021).  More...

Published – articles, papers, reports

Australian Bureau of Statistics
10 March 2021 - Updated information
Building Approvals data for small geographic areas
Building Approvals, Australia

ABCC Industry Update - 10 March 2021 Edition
Do you understand right of entry? Test your knowledge in the March edition of Industry Update, where we look at right of entry, delve into case studies and more. Read more here.

Temperature check: Greening Australia's warming cities
Monash University researchers and the Australian Conservation Foundation (ACF): 11 March 2021
The report finds: Hot summer days in Brisbane and Melbourne are expected to regularly top 40°C by 2060-2080, and up to 50°C in Sydney, with a phenomenon known as the Urban Heat Island (UHI) effect likely to add several degrees on top of this in highly vulnerable suburbs. Read more here.

Practice and courts

HIA Submissions
Stamp duty reform, buying in NSW - Building a future (921KB) - 15 March 2021

AIBS: Public Consultation on Proposed AIBS Professional Standards Scheme
Public consultation has now commenced for the proposed AIBS Professional Standards Scheme for Building Surveyors and will be open until 31 March 2021. The following relevant documents are listed below
1. Notice of the Proposed AIBS Professional Standards Scheme
2. The proposed AIBS Scheme Instrument
3. The AIBS Public Consultation Document (02 March 2021)

ABCB Consultation open: Building Manuals - A response to the Building Confidence Report
A discussion paper is now open for public consultation in response to the Building Confidence Report.
Recommendation 20 of the Building Confidence Report (BCR) states that each jurisdiction should require a comprehensive building manual for Class 2 - 9 buildings to be lodged with the building owners and made available to successive purchasers of the buildings. Responses to questions in the discussion paper are welcomed until 17 May 2021, using form via the ABCB’s Consultation Hub (09 March 2021)

ABCB Consultation
Discussion Paper: Integrity of private building surveyors and their role in enforcement - a response to the Building Confidence Report
A discussion paper is now open for public consultation in response to the Building Confidence Report (BCR) The report made 24 recommendations for a best practice model for compliance and enforcement, to strengthen the effective implementation of the National Construction Code (NCC). Comment closes 27 April 2021.

ABCB: Improvements to the code’s structure and format will be implemented for NCC 2022
To guide users through the changes, the ABCB has developed a range of supporting resources that will be released in stages leading up to the publication of the NCC 2022 Public Comment Draft on 10 May 2021.
The first stage of articles and resources are being released here.

Adoption of NCC 2022 to be delayed
The delayed adoption will also see adjustments to key dates in the amendment cycle process for NCC 2022 to allow stakeholders time to participate. These adjusted dates include:
May – July 2021: NCC 2022 Public Comment Draft released for public consultation
May 2022: NCC 2022 Preview published here.
If you have any questions regarding the delayed adoption of NCC 2022, please submit an online enquiry.

NSW Land and Environment Court

Design at the heart of new planning policy
The Explanation of Intended Effect (EIE) for the Design and Place State Environmental Planning Policy (SEPP), proposes to consolidate and replace existing design-focused policies, including SEPP 65 and BASIX SEPP to ensure good design outcomes for any new major development.
The Explanation of Intended Effect (EIE) for the Design and Place SEPP is now on public exhibition for six weeks until March 31. For more information and to submit feedback, visit the Design and Place SEPP.

Have your say on changes to how building design and construction is regulated in NSW
The development of supporting regulations is the next step on delivering on this piece of the Government’s building reform agenda, with the scheme commencing on 1 July 2021. The Design and Building Practitioners Regulation commences on this date. Have your say here.

Conflicts of interest – savings and transitional arrangements
Clause 71 of the Regulation introduces savings provisions for certain conflict of interest situations where the certifier was appointed before 1 July 2020 and the work will be completed before 1 July 2022. The provisions relate to council-certified developments and to developments where the certifier gave advice on how to comply with the BCA deemed to satisfy provisions. For all the changes, access the Amendment Regulation here.

The draft Design and Building Practitioners Regulation 2020
The NSW Design and Building Practitioners Act 2020 provisions of the Act will commence on 1 July 2021.
The draft Design and Building Practitioners Regulation includes registration schemes for design and building practitioners and engineers who work on multistorey, multi-unit residential apartment buildings.
The Government will finalise the Regulations in early 2021, ready to be implemented on 1 July 2021. Read more here.

New mandatory standards for building rectification
The standard will be reviewed and updated prior to the 1 July 2021 commencement of the Government’s game changing building reform agenda underpinned by the Design and Building Practitioners Act 2020.
The first Practice Standard will initially apply to certifiers working on residential apartment buildings, where the majority of problems and complaints have been received. The Practice Standard for registered certifiers is available on the Fair Trading NSW website.

NSW Revenue: Land Tax Build to Rent
The NSW Government is introducing a land tax discount for new build-to-rent housing projects until 2040 and a new Housing Diversity SEPP to provide more housing options, greater surety for renters, boost construction and support jobs during the COVID-19 recovery.

NSW Revenue: Extension to HomeBuilder Grant
On 29 November 2020 the Australian Government Announced an extension to the HomeBuilder program until 31 March 2021.

Cases

NSW

Huang v The Owners – Strata Plan No 7632 (No 2) [2021] NSWCATAP 67
We order that the appellants pay the costs of the respondent of these appeals in an amount assessed on the basis set out in the legal costs legislation.
COSTS – appeals – held appeal proceedings were without merit and endeavoured to re-agitate and relitigate matters previously decided adversely to the appellants – held constituted “special circumstances” justifying the making of a costs order.
As the respondent submitted, the appellants argued in the appeal that there had been a failure to assess building defects under the Home Building Act. We held that this was irrelevant.

Owners of Strata Plan No 30791 v Southern Cross Constructions (ACT) Pty Ltd (in liquidation) (No 2) [2021] NSWCA 35
TORTS — negligence — apportionment of responsibility and damages — adjustment to reflect concurrent wrongdoing by entity not party to proceeding COSTS — party/party — general rule that costs follow the event — application of the rule and discretion — where appellant partially successful in appeal involving multiple parties — reduction commensurate with hearing time spent on successful aspects of appeal COSTS — party/party — orders when proceedings involve multiple parties on appeal — allegations of concurrent wrongdoing by respondents — appeal successful against one respondent but not against another — appellant did not pursue concurrent wrongdoing allegations at hearing — whether appellant’s costs in respect of the successful respondent should be ordered against the unsuccessful respondents.

CE Coogee Development Pty Ltd v Randwick City Council [2021] NSWLEC 1125
(1) The appeal is upheld.
MODIFICATION APPLICATION – appeal against imposition of condition – whether substantially the same development – visual privacy – daylight and ventilation. Architects Act 1921; Architects Act 2003.

Abdishou v Hardy [2021] NSWCATAP 55
(1) Application for an extension of time for the filing of the appeal refused.
APPEALS - Extension of time refused - Principles as to extension of time - Procedural fairness - No error of law - No ground on which leave to appeal should be granted.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW).
Home Building Act 1989 (NSW); Home Building Regulation 2014 (NSW).

Andrix Homes & Constructions Pty Ltd v Mac & Anor [2021] NSWDC 53
BUILDING AND CONSTRUCTION – Contract – Termination – binding and enforceable agreement – separate question.

RBV Builders Pty Ltd v Chedra [2021] NSWCATAP 56
BUILDING AND CONSTRUCTION — Home Building Act 1989 (NSW) — Statutory warranty – Plans and specifications – Whether specifications included oral instructions – Defences – section 18F – Whether contract drawings constitute an “instruction given in writing” for the purposes of s 18F COSTS – Relevant considerations.

Abdishou v Hardy [2021] NSWCATAP 55
(2) Appeal dismissed. APPEALS - Extension of time refused - Principles as to extension of time - Procedural fairness - No error of law - No ground on which leave to appeal should be granted.
Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Rules 2014 (NSW);
Home Building Act 1989 (NSW); Home Building Regulation 2014 (NSW).

Robinson v Hindmarsh Construction Australia Pty Ltd [2021] NSWCATAP 51
BUILDING AND CONSTRUCTION - Home Building Act 1989 (NSW) - statutory warranty - proceedings for breach – relevance of contract – identification of contract to perform residential building work – relevance to statutory warranties APPEALS - procedural fairness - failure to give reasons - adequacy of reasons – evidence not referred to – whether evidence important or critical to resolving the particular issue – whether an inference could be drawn that the evidence was overlooked.

Legislation

Bills introduced Government – 19 March 2021
Mutual Recognition (New South Wales) Amendment Bill 2021
The new amendment reference extends to the making of express amendments of the Commonwealth Act if the amendments are with respect to—(a) the matter of providing for individuals lawfully authorised to carry on an occupation in a State to carry on the occupation in another State or Territory.

Regulations and other miscellaneous instruments
Electricity Infrastructure Investment Regulation 2021 (2021-102) — published LW 12 March 2021
Environmental Planning and Assessment Amendment (Inland Rail) Order 2021 (2021-103) — published LW 12 March 2021
Environmental Planning and Assessment Amendment (Subdivision Certificates) Regulation 2021 (2021-104) — published LW 12 March 2021

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Ushna Bashir

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