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From 21 October 2019 the Security of Payment amendments in New South Wales will commence. Are you ready?

24 July 2019
Euro coins
The Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (“the Act”) will commence on 21 October 2019 bringing about various changes to the existing security of payment regime in New South Wales.

Key changes and their implications

Key changes industry participants need to be aware of include:
broadening the right to progress payments;
shortening payment timeframes of progress payments to subcontractors;
requiring payment claims to state that the claim is made under the Act (in order to have the force of the Act);
increasing penalties for a head contractor failing to properly provide a supporting statement by 500%; and
enhancing investigative powers of the ‘authorised officer’ that include the ability to enter premises.

Some of the updates to the Act may have a significant impact on construction contracts which we discuss below.

 

1. Right to progress payments 

Entitlement to progress payments are no longer tied to the occurrence of a ‘reference date’. The right to a progress payment now arises simply by a person, under a construction contract, undertaking to carry out construction work or supplying related goods or services.  

 

2. Payment timeframes 

Under the new updates, progress payments to a subcontractor under a construction contract become due and payable 20 business days (previously 30 business days) after the payment claim is made under the Act. 

 

3. Claim under the Act 

Progress claims are again required to state that they are ‘made under the Act’ (in order to have the force of the Act). This amendment aligns with the findings of the Murray Report which recommends a clear distinction is made between a claim under the Act and a claim that is made under contract. However, it also places the discretion back into the hands of the claimant and provides claimants an additional negotiation tool, ultimately enhancing the claimant’s bargaining power.

 

4. Increased penalties 

The penalty for a head contractor failing to provide a supporting statement when serving a payment claim on a principal has increased from 200 penalty units to 1000 penalty units. In monetary terms, the penalty has increased from $22,000 to $110,000 per occurrence. In line with this rationale, the penalty for a head contractor providing a supporting statement that is known to be false or misleading when serving a payment claim on a principal has also increased from 200 penalty units to 1000 penalty units.

 

What do you need to do?

The Security of Payment updates in New South Wales will require industry participants to update their contracts and contract administration processes to avoid falling foul of the amendments to the Act.

If you require further information or have any queries in relation to this legal update, please contact Goran Gelic, Brent Henderson or Alex McLeod.
 

Further Reading