Are you aware of the new requirements under the Building and Construction Industry Security of Payments Act ?
This article will be relevant to you if you are a contractor who performs commercial building work or if you engage a contractor to perform building work on a commercial project of yours. The legislation discussed below does not apply to residential construction work. The definition of construction work is exhaustive and is reproduced at the end of this article.
Amendments have occurred to the Building and Construction Industry Security of Payments Act (‘the Act’), primarily for the purpose of providing greater protection to sub-contractors and to ensure a quicker flow of payments under Building and Construction contracts.
In short, the amendments were as follows:
- The removal of the requirement to state that a payment claim is made under the Act;
- The introduction of prompt and maximum payment terms for progress payments; and
- A new requirement that when a head contractor makes a payment claim they must provide a supporting statement included in the payment claim, declaring that sub- contractors have been paid what they are owed.
1. Payment Claim Statement
A ‘payment claim’ is usually in the form of an invoice and is a demand for payment.
When issuing a payment claim, which can be a tax invoice that meets the requirements for a payment claim, there is no longer the requirement that the statement includes words to the effect of ‘this is a payment claim made under the Building and Construction Industry Security of Payments Act 1999’ . This removal of this requirement effectively means that every tax invoice issued in relation to work performed under the Act, which meets all the other requirements for a valid payment claim, is potentially a payment claim.
For those who receive a payment claim for work that would be covered by the Act , they must make a progress payment in the appropriate time or issue a payment schedule within the appropriate time if they wish to dispute the claim.
2. Prompt Payment (Progress Payments)
New payment terms have been introduced and include:
Principal to Head Contractor – Now under the Act a progress payment to a head contractor becomes due and payable 15 business days after a payment claim has been made.
Payments to sub-contractors- A progress payment to a sub-contractor or supplier is due and payable 30 business days after a payment claim has been made.
These are important provisions because whilst a contract can provide for a shorter payment period, it cannot provide for a payment period outside of these provisions and if it does so those terms are rendered invalid.
We recommend that businesses who can utilise the Act ensure their payment terms are in line with these provisions.
3. Head Contractor Supporting Statement
A head contractor can no longer serve a payment claim on a principal unless it is accompanied by a supporting statement declaring that all sub-contractors they have engaged have been paid all payments owing.
The Department of Finance and Services (DFS) will have the authority to investigate, and where necessary, prosecute falsely made statements.
If you need any assistance in understanding the changes or in ensuring your payment claims satisfy the requirements of the Act, including the drafting of Head Contractor Supporting statements, our team of lawyers can assist in helping you comply as well as advising on your rights under the Act.
“construction work” means any of the following work:
(a) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not),
(b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage or coast protection,
(c) the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems,
(d) the external or internal cleaning of buildings, structures and works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension,
(e) any operation which forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraph (a), (b) or (c), including:
(i) site clearance, earth-moving, excavation, tunnelling and boring, and
(ii) the laying of foundations, and
(iii) the erection, maintenance or dismantling of scaffolding, and
(iv) the prefabrication of components to form part of any building, structure or works, whether carried out on-site or off-site, and
(v) site restoration, landscaping and the provision of roadways and other access works,
(f) the painting or decorating of the internal or external surfaces of any building, structure or works,
(g) any other work of a kind prescribed by the regulations for the purposes of this subsection.
(2) Despite subsection (1),
“construction work” does not include any of the following work:
(a) the drilling for, or extraction of, oil or natural gas,
(b) the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose,
(c) any other work of a kind prescribed by the regulations for the purposes of this subsection.