Recent amendments to the Building and Construction Security of Payment Act 1999 (NSW)

In response to the findings of the Independent Inquiry into Construction Industry Insolvency
(also known as the Collins Inquiry), the NSW Government passed important amendments to the Building and Constructions Security of Payments Act 1999(NSW) (SOP Act) in November 2013.

The date on which these changes come into effect is yet to be proclaimed, though this proclamation is anticipated in the coming months.

The main amendments are threefold.

No payment claim declaration required

Amendments to Section 13 of the SOP Act have removed the requirement that a written declaration be provided on a payment claim confirming that it is a payment claim made under the Act.

This means that the phrase “This is a claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW)”, or words to that effect, will no longer need to be displayed in order for a payment claim to be deemed valid.

Importantly, this means that in order to constitute a valid payment claim under the amended SOP Act, the requirements will be limited to:

  • adequately identifying the contractor to whom the payment claim is issued (which includes specifying the ACN or ABN details of the contractor where appropriate);
  • specifying the amount of the progress payment that is claimed;
  • adequately describing the goods and/or related goods and services to which the payment claim relates; and
  • ensuring that the payment claim is served within 12 months of the works being last carried out or the related goods and services last supplied. When serving corporate contractors by post, care should be taken to ensure that the payment claim is posted to the company’s registered address or ordinary place of business as listed with the Australia Securities and Investments Commission in accordance with s109X of the Corporations Act 2001 (Cth) or Section 31 of the SOP Act.
Provision of supporting statements

Amendments to Section 13 also make it an offence for a head contractor to serve a payment claim on the principal unless the claim is accompanied by a supporting statement declaring that all subcontractors have been paid any amounts that have become due and payable. Fines of up to $22,000.00 may be imposed.

Furthermore, if a head contractor serves a payment claim on the principal accompanied by a supporting statement that is materially false or misleading, fines of up to $22,000.00 and/or 3 months imprisonment may apply.

Fixed deadlines for payment of progress payments

Section 11 of the SOP Act now requires that a progress payment to a head contractor by the principal becomes due and payable no later than 15 business days after a payment claim is made. A progress payment to a subcontractor becomes due and payable no later than 30 business days after the payment claim is made.

Commercial building contracts cannot, therefore, specify any extended time period in relation to when progress payments become due and payable, as the maximum deadline for these progress payments is now fixed by the SOP Act.

Application of the new amendments and timing

These changes do not apply to commercial construction contracts entered into prior to the amendments taking effect (which, as noted above, is yet to be proclaimed).

It should also be noted that subject to limited exceptions residential construction contracts remain exempt from the SOP Act and the amendments as outlined above.

Should you have any queries regarding these recent changes to the SOP Act and their effect on your business, William Roberts’ team of accredited building and construction specialists are able to assist.

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