14 December 2018
On Monday important security of payment legislative changes will take effect. Here’s the important information you need to know to ensure your business is compliant.
The legislation – Building Industry Fairness (Security of Payment) Act 2017
The Building Construction Industry Payments Act (BCIPA) will be repealed and replaced by Chapter 3 of the Building Industry Fairness (Security of Payment) Act 2017 (BIF 3). However, BCIPA will still apply to all payment claims that were validly served under the BCIPA prior to 17 December 2018. This applies to all construction work and related goods or services, not just building work under the QBCC Act.
The Subcontractors’ Charges Act 1974 (SCA) will be repealed and replaced by Chapter 4 of the BIF Act (BIF 4). However, SCA will still apply to all subcontractors' charges that were given prior to 17 December 2018 that haven't been extinguished or otherwise come to an end. All subcontractors' charges given on 17 December 2018 onwards, fall under the requirements of BIF 4.
Chapter 4 will govern subcontractors charges given from 17 December 2018, even for contracts entered into before this date.
Changes and penalties
These changes introduce new requirements and penalties to the security of payment process in Queensland.
- You must respond to every payment claim for a progress payment by either paying the claimed amount in full by the due date OR responding to the claim with a payment schedule
- Payment claims will no longer need to be endorsed under BCIPA (you no longer need to include specific wording) but must include a request for payment. A written document that includes the word ‘invoice’ is taken to be a request for payment but a payment claim DOES NOT need to be an invoice.
- Payment claims may be given by contractors, subcontractors, sub-subcontractors, suppliers or consultants.
- Payment schedules must be given within 15 business days of receiving a payment claim (or earlier if provided for in the contract)
- High penalties (up to $13,055) may apply for failing to provide a payment schedule in response to a payment claim or for not paying in full by the due date (IMPORTANT: this relates to all payment claims from 17 December 2018, even for contracts signed prior to this date)
Adjudication and disputes
- Claimants are no longer required to provide a Respondent with a ‘second chance’ to provide a payment schedule
- Respondents can no longer raise new reasons in an adjudication response that were not included in a payment schedule
- New application time-frames of up to 30 business days
- If given a subcontractors' charge, contractors must respond with penalties applying for failing to respond within ten business days
The legislation – Queensland Building and Construction Commission Act 1991
Serious new offences come into force in the QBCC Act on Monday, 17 December 2018 in relation to retention and the Defects Liability Period.
Notice about end of Defects Liability Period
All contractors who are holding retention or security under a building contract must provide a notice in the approved form within 10 business days before the end of the defects liability period. The notice must state:
- The date that the defects liability period ends
- For a retention amount:
- The amount to be paid at the end of the defects liability period if no amount is required to correct defects in the building work under the contract; and
- The date the retention amount is proposed to be paid.
There is a maximum penalty of approximately $13,000 for failing to issue the notice.
The notice must be in the approved form which can be obtained from the QBCC.
Failure to pay retention amount
All contractors who are holding retention under a building contract must, unless the contractor has a reasonable excuse, release the retention amount to the other party in accordance with the contract. Failure to do so attracts a maximum penalty of approximately $26,000 or one year’s imprisonment.
However, the above requirement doesn't apply to the part of the retention amount that is the subject of a dispute between the parties that is unresolved or the amount is paid into court to satisfy a subcontractors’ charge.
This new provision applies to both retention due to be released at practical completion and the end of the defects liability period.
While the changes themselves are quite simple, how they translate into your business may not be. Call our team of experts on 1300 30 50 10 or email firstname.lastname@example.org and we can help.
We’ve also developed a compliant payment schedule template that you can use within your business that will assist you. For specific advice on how to implement this template into your own business processes, call us on 1300 30 50 10.