CHANGESAFOOT IN THE NSW CONSTRUCTION INDUSTRY
The NSW Security of Payment is about to be amended and the amendments will come to effect on a date to be proclaimed.
Residential Building Work: There has long been a perception in the construction industry that the Act does not apply to residential building work. This is true only so far as claims between contractors and residents/proposed residents go. The Act has always been available to subcontractors where they are not directly engaged by residents. The amendments will specifically provide a payment regime for subcontractors to make payment claims against head contractors for residential work. Their payment claims must state that they are made under the Act. Subcontractors can expect payment within 10 business days of making the claim unless their contract provides for earlier payment.
Payment Claims generally: Other than as stated above, payment claims will no longer need to contain the endorsement that they are made under the Act. Head contractors will need to be on their toes so as to respond within 10 business days to all claims and not only those containing the endorsement.
Payment due dates: The Act will contain differing regimes for payment depending on the type of work and who is making the claim. Subject to the terms of their contract,
- for exempt residential building work,subcontractors are to be paid within “10 business days” (2 weeks+);
- for commercial and non-exempt residential building work:
head contractors can expect to be paid within “15 business days” (3 weeks+);
sub contractors can expect to be paid within “30 business days” (6 weeks+).
Retentions: Retentions have long been a bugbear for subcontractors. Where a contract provides for retentions, head contractors will need to place that money into a trust account for the subcontractor, which will need to be managed in accordance with new regulations.
Statutory declaration that workers have been paid: Head contractors will not be allowed to serve a payment claim on a principal unless it is accompanied by a statutory declaration that all subcontractors have been paid. Penalty: 200 penalty units ($34,000) and/or 3 months’ imprisonment. Responsibility for investigating and prosecuting offences will fall on an authorised officer appointed by the NSW Government. This person will have wide powers to ask for, inspect and keep documentation. Failure to comply with requests can result in huge penalties and/or imprisonment.
Disclaimer: While all care has been taken to accurately report on the law, this post is not intended to constitute legal advice. Persons seeking legal advice are encouraged to contact Longmores Lawyers & Property Conveyancers directly.