Changes to Security of Payments Legislation

What are the changes?

When a building contractor submits a payment claim to the homeowner under the Security of Payment laws, if the contract does not specifically specify when the progress payments become due and payable, payment can be made 10 business days after the payment claim was sent.

A homeowner who has been served with a payment claim can respond by providing the building contractor with a payment schedule. The homeowner must have a payment plan under specific timeframes. They are as follows:

• within the time outlined in the construction contract, or
• within 10 business days after the payment claim is served (whichever is earlier).

If the homeowner fails to pay the building contractor on time, penalties apply, including the suspension of construction work under the construction contract and interest due on the outstanding balance of a progress payment.

Why were the changes made?

By requiring progress payments, Security of Payment regulations are intended to provide a consistent cash flow for building and construction contractors. Until now, owner occupier building contracts were excluded from Security of Payment laws. This meant that builders (head contractors) who did residential building work could not make a payment claim against a homeowner (principal), even though the work was completed.

If the homeowner did not pay the head contractors, but the head contractors were required to pay subcontractors, this placed the head contractors in a tough financial situation.

Although the arrangement with a residential head contractor and a “mum and dad” homeowner is not the same as that between a head contractor and a subcontractor, residential head contractors face common cash flow problems to subcontractors, like insolvency, where they do not collect timely payment for construction work completed.

Adding owner occupier construction contracts under Security of Payment laws would guarantee the building and construction industry head contractors and subcontractors are paid on time for their jobs.

Applying for adjudication

Only the person making a claim can start adjudication to work out the due amount (if any) for a payment claim. It’s an independent, informal process to help resolve a claim quickly and inexpensively.  Any Authorised Nominating Authority (ANA) can give you an adjudication application form. Your application must:

• be in writing
• request the nomination of an adjudicator
• be lodged with the ANA within the required time
• be served upon the respondent at the same time
• be accompanied by any ANA’s application fee
• include a copy of the payment claim
• include a copy of the payment schedule (if any)
• include all information in support of the claim that you want the adjudicator to consider, and
• include a copy of the contract.

How much does it cost?

Fees for adjudicators, expenses, and the Authorised Nominating Authority are all included in the charges. Fees may be reduced by keeping issues simple and parties’ submissions transparent, succinct, and full. If the adjudicator agrees otherwise, the complainant and respondent pay the same adjudicator fees.

How do I contact Authorised Nominating Authorities (ANA’s)?

You can contact ANA’s by clicking here.

Members are advised to closely study the Security of Payment legislation, as well as the whole process, before proceeding.

For more information regarding Security of Payment please click here.