Amendments to NSW Security of Payment legislation to commence in October01 August 2019
The NSW Government has determined that the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (Amendment Act) and the Building and Construction Industry Security of Payment Amendment Regulation 2019 (NSW) (Amendment Regulation) will commence on 21 October 2019. These reforms will significantly affect the rights of claimants and recipients of claims under the security of payment legislation in NSW, and aim to provide better protection to subcontractors as well as to promote cashflow within the contracting chain.
As set out in our previous updates, these reforms will:
- establish a minimum monthly entitlement to claim a progress payment and remove the concept of a “reference date” for making a payment claim
- establish an entitlement to a final progress payment after termination of a contract
- shorten the maximum permitted payment due date from 30 to 20 business days for progress payments made by a head contractor
- re-insert the requirement that a payment claim states that it is made under the Building and Construction Industry Security of Payment Act 1999 (NSW)
- expressly provide for the withdrawal of adjudication applications
- allow an adjudicator 10 business days to determine applications from the date of receipt of the adjudication response
- reduce the threshold for retention money trust requirements to projects valued at $10 million or more (reduced from $20 million or more)
- allow the inspection of trust account records held by head contractors
- provide the Supreme Court with the power to partially uphold adjudication determinations, rather than set aside the entire determination
- prohibit a corporation in liquidation from making a payment claim, and
- increase penalties and create new offences (for more information on penalties and offences, click here).
These reforms will only apply to construction contracts entered into after 21 October 2019.
Those affected by the security of payment legislation in NSW will need to consider the effect of these changes in relation to contracts that will be entered into after 21 October 2019. That consideration may need to include making changes to contractual provisions concerning claims for payment.
Significantly, the reforms appear to provide for a monthly entitlement to claim a progress payment even if the progress payment is a milestone payment. It will therefore be critical to contractually address the valuation of a monthly payment claim where the milestone has not been achieved at the time of the monthly claim. Additionally, the currently often-used approaches of creating pre-conditions to a reference date arising and limiting references dates after completion will need to be reconsidered.