The New South Wales Government has announced that the first tranche of amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) will come into effect in just two weeks, on Monday 21 April 2014.
When will the amendments apply?
The amendments will apply to construction contracts entered into on and from Monday 21 April 2014. Residential construction contracts largely are not affected by the changes.
What are the amendments?
In summary, on 21 April:
- payment claims no longer need to state they are being made under the Act in order for the Act to apply,
- head contractors will need to provide a supporting statement containing a declaration that subcontractors have been paid what is due and payable when submitting a payment claim to their principal. The Department of Finance and Services will have the authority to investigate compliance with these requirements, and this includes requiring head contractors to provide them with relevant information and documents,
- head contractors must be paid within 15 business days of submitting a payment claim (or an earlier date provided for in the contract),
- subcontractors must be paid within 30 business days of submitting a payment claim (or an earlier date provided for in the contract), and
- there are significant penalties for failing to comply with some of the new requirements, in particular a fine of up to $22,000 or 3 months imprisonment (or both) for a head contractor who serves a payment claim without a supporting statement, or who serves a payment claim accompanied by a supporting statement which it knows to be false or misleading in a material particular. The supporting statement is required to be in the form prescribed by the Regulations.
For more information on the changes see our previously published article on the reforms1.
The form of the supporting statement is to be prescribed in regulations. As yet, the regulations have not been proclaimed. It is, however, expected that regulations including a form of supporting statement will be proclaimed ahead of 21 April 2014.
It is unlikely that any regulations released before 21 April 2014 will make provision for trust account requirements.
What does this mean for you?
Commercial construction contracts entered into on or after 21 April 2014 will be subject to the amendments. Parties should move quickly to ensure that contracts likely to be entered into on or after that date have been amended to comply with the changes, and that payment and administrative processes have been updated. The short payment timeframes, in particular, are likely to cause headaches if payment processes are not adjusted ahead of time.