The new Building and Construction Industry Security of Payment Regulation 2020 (NSW) (Regulations) come into effect on 1 March 2021. Under the Regulations, a landmark change has been made allowing builders to submit payment claims for residential building works.
The question is: what do these changes mean for builders and homeowners?
Previous Restrictions
Previously, the Building and Construction Industry Security of Payment Act 1999 (SoP Act) excluded the right for builders to make a claim for residential building works under an ‘owner occupied’ construction contract.
Owner occupied contracts include residential building works completed under the Home Building Act 1989 (NSW) on buildings that a party intended to reside in or currently resides in.
Home building works and renovations works on residential premises were not previously covered by the SoP Act, meaning builders were forced to engage in litigation, which could sometimes be costly, slow and protracted.
New Law
Under the Regulations, this previous exclusion has been lifted, allowing residential builders to submit payment claims under the SoP Act.
For contracts entered into after 1 March 2021, builders and home owners should be aware of the new changes and the ability for payment claims to be submitted for outstanding invoices.
Payment Claim Process
A payment claim is a formal demand from a builder or contractor for payment pursuant to a construction contract.
Under the SoP Act, once a payment claim is served, the party it is issued to has 10 business days to respond by way of payment schedule setting out reasons why the payment is a part payment or a $NIL payment, if there is a dispute as to the payment for the works the matter can proceed either to Court or to Adjudication.
Impact for Builders and Home Owners
For both homeowners and builders, the new Regulations bring in a dramatic change to the status quo.
Homeowners:
- The SoP Act payment claim process is a time sensitive process. Missing a deadline by even a day may prove costly.
- Payment claims should be actioned immediately and you should obtain legal advice as soon as possible.
- Failing to respond to a payment claim or adjudication process may mean a judgment could be entered against you for the outstanding funds.
Builders:
- The new Regulations allow residential building works to be the subject of a payment claim, allowing for faster recovery of money owing.
- Payment claims and the adjudication process under the SoP Act is a faster and cheaper alternative to litigation.
- Payment claims can only be submitted for contracts entered into after 1 March 2021. Existing contracts will not be covered by the Regulations.
How Can Marsdens’ Help You?
Independent legal advice should always be obtained, and a quick response to payment claims or debts owing is crucial. Delay may mean that action is taken against you, or you are unable to access the streamlined adjudication process under the SoP Act.
If you are a builder who is looking to recover debts owed under residential building works, or you are a homeowner who has been served with a payment claim, contact Partners Aaran Johnson or Bharath Balasubramanian (contact details below) to find out how Marsdens’ can assist you.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
