The final tranche of changes introduced by the Home Building Amendment Act 2014 (NSW) will come into effect on 1 March 2015.

These include mandatory changes to residential building contracts and require changes to many bespoke and standard form contracts. Failure to comply with the new contract requirements presents exposure to fines of up to $110,000.00.

Our update in respect of the amendments which came into force earlier this year (on 15 January 2015) can be found here. For more information in relation to how the Home Building Act 1989 (NSW) has been significantly amended by the Amendment Act please see our updates here and here.

Briefly, the contract related amendments commencing on 1 March 2015 are:

  • The requirement for a brief albeit mandatory statement of the owner’s termination rights;
  • For contracts for residential building work with a market value of $20,000 (incl. GST) or more only two types of progress payments will be permitted, namely claims for:
  1. a specific amount (or percentage) of the contract price payablefollowing completion of an identified stage of work that hasbeen described in clear language; or
  2. payment for labour and materials for costs already incurred orwork already carried out, with the claim supported bydocumentation, invoices or receipts at intervals fixed by the contract or on an ‘as invoiced’ basis.

These are known as Authorised Progress Payments. Heavy fines apply for demanding or receiving payment of a progress claim other than by way of an Authorised Progress Payment.  Entering into a contract providing for other than an Authorised Progress Payments is also an offence.

This does not apply to claims to which the Building and Construction Industry Security of Payment Act1999 (NSW) could have applied and does not apply to contracts entered into between licensees or for subcontracts with licensees.

A contract may provide for more than one kind of Authorised Progress Payment.

  • A statement of the duties of persons having the benefit of statutory warranties including:
  1. the duty to mitigate the loss;
  2. a duty to give the contractor notice in writing of the alleged breachwithin six months after the breach becomes apparent; and
  3. a duty not to unreasonably refuse a contractor access to the work thesubject of the alleged breach;

Breach of these duties will not disqualify a warranty claim but may have an impact upon the compensation recovered;

  • The wording of the statutory warranty that requires all work to be performed in a ‘proper workmanlike manner’ is to be amended, so that now all work is to be ‘done with due care and skill’;
  • An increase in maximum permissible deposits for work (over $20,000 inclusive of GST) to 10% of the contract price (whatever the contract sum).