On 11 November 2013 we told you about the 3 major changes that the Building and Construction Industry Security of Payment Amendment Bill 2013 (Bill) will make to the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act).
This has now increased to 4 major changes.
On 12 November 2013 the Bill was passed in the NSW upper house (the Legislative Council) with an additional amendment that makes provision for regulations requiring head contractors to place subcontractor retention money in a statutory trust fund and providing for penalties for failing to do so.
For ease of reference, we again set out the major changes introduced by the Bill, with the inclusion of the new amendment.
What are the proposed changes?
The Bill introduces 4 major changes to the Act:
- Act applies to all payment claims for construction work or related goods and services: Except for certain residential building contracts, payment claims will no longer need to include a statement that they are made under the Act to attract the operation of the Act. Claims management processes will therefore need to be even more rigorous given the likely increase in the number of claims to be dealt with in accordance with the Act.
- Prompt payment: A maximum time for payment will be prescribed, so that progress payments from a principal to a head contractor will be due and payable 15 business days after the payment claim is made, and from a head contractor to a subcontractor 30 business days after the payment claim is made. Longer payment terms will have no effect. Certain residential building contracts will be excluded from these maximum payment periods.
- Supporting statements: A head contractor will need to submit a “supporting statement” with each payment claim, declaring that it has paid its subcontractors all amounts that have become due and payable in relation to the construction work concerned. A failure to do so will be an offence with a maximum penalty of $22,000. Knowingly providing a false or misleading supporting statement will be a separate offence with a maximum penalty of $22,000, 3 months imprisonment or both. A form of the statement will be prescribed in the regulations.
- Retention money trust account: Power will be granted to the Government to proclaim regulations requiring retention money held by a head contractor as security for a subcontractor’s performance obligations under a construction contract to be held in trust for the subcontractor entitled to the money. For this purpose, the head contractor will be required to pay that money into a trust account that is established and operated in accordance with the regulations. The regulations may also provide that a failure to comply with the retention money trust requirements is an offence punishable by penalty not exceeding $22,000.
Once enacted, contract administrators, principals and head contractors will need to ensure compliance with the new provisions, paying special attention to the new prompt payment requirements.
Author(s): Ronit Olovitz
Partner | Melbourne
T +61 3 9321 9919
Partner | Brisbane
T: +61 7 3135 0614
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