On 1 March 2021, Schedule 2[2] of the Building and Construction Industry Security of Payment Regulation 2020 (NSW) (Regulations) came into force.
As a result, owner occupier construction contracts entered into on or after 1 March 2021 are no longer exempt from the application of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act).
Improving Cashflow for Builders
These changes have the effect of permitting contractors carrying out construction work on owner occupier properties to use the Act for the purposes of interim cashflow. This includes service of payment claims on owner occupiers and a requirement for owner occupiers to respond with payment schedules in compliance with the Act.
Contractors therefore can:
- refer a payment claim to adjudication for determination under the Act; or
- where an owner occupier fails to provide a payment schedule in accordance with the Act, apply for summary judgment for the amount of the payment claim. Such judgment may then be enforced by the contractor against the owner occupier (for example, by way of a statutory demand or garnishee orders).
NSW Government Commentary
In June 2020 the ‘Better Regulation Division’, under the NSW Government’s Department of Customer Service, issued a ‘Regulatory Impact Statement’ (RIS) on changes to the Regulation which stated:
[The exemption] effectively means that builders who carry out construction work in the residential sector can’t make a statutory payment claim against an owner occupier, even though subcontractors who carry out work on the same project can make such claims against the builder. This can put builders in a difficult financial position in circumstances where the owner occupier doesn’t pay the builder, but the builder is still obliged to pay the subcontractors.
According to the RIS, the extension of the Act to owner occupiers was considered necessary to improve the commercial position of builders.
Amendments to the Act
Section 7(5) of the Act defines an exemption for any class of construction contracts referred to the Regulations.
Prior to 1 March 2021, section 4(1) of the Regulation prescribed that owner occupier contracts were exempt from the operation of the Act. From 1 March 2021 this exemption has been omitted. The Act now applies to owner occupier construction contracts.
Schedule 2[1] of the Regulations also aligns owner occupier construction contracts with the due date for payment in relation to residential construction contracts under section 11(1C) of the Act.
Conclusion
These changes to the Regulations will allow contractors to use the Act in payment disputes regarding owner occupier contracts.
Please contact Stefan Fenk on (02) 9261 5900 or stefan.fenk@vincentyoung.com.au if you have any questions regarding these changes.
The contents of this publication do not constitute legal advice and are for general information purposes only. You should seek legal advice regarding your particular circumstances.