NSW security of payment changes to commence on 21 October 2019

Introduction

The NSW government has recently issued a Commencement Proclamation for the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (Amending Act) and delivered the much anticipated Building and Construction Industry Security of Payment Amendment Regulation 2019 (Regulations).

Application of the Amending Act to construction contracts

The Amending Act will commence on 21 October 2019 and will apply to all contracts entered into after that date and will not act retrospectively.

A brief summary of the changes are as follows:

1. the accrual of a ‘reference date’ is no longer a precondition to a valid payment claim;
2. a payment claim is able to be served monthly, on and from the last day of the named month in which the construction work was first carried out, and on the last day of each subsequent month; 
3. a payment claim can be validly served after termination of a construction contract;
4. a payment claim must state that it is made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act);
5. the due date for payment of a payment claim to a subcontractor has been reduced from 30 business days to 20 business days after a payment claim is made;
6. the Amending Act empowers the Supreme Court of NSW to sever a particular part of an adjudication determination that is subject to jurisdictional error; and
7. pecuniary penalties for breaches of section 13(7) and (8) of the Act in relation to supporting statements have been increased to 1,000 penalty units for a corporation and 200 penalty units for an individual. 

Further detail in respect of the above changes are outlined in our earlier article here.

Regulations to take effect

The Regulations will also take effect on and from 21 October 2019. In summary, the key reforms introduced by the Regulations are as follows:

1. owner occupier construction contracts are excluded as a class of construction contract from the security of payment regime;
2. particular retention money trust account offences which attract executive liability are now set out; and
3. offences under the Act and Regulations for which a penalty notice may be issued and the relevant amounts payable for these offences are now specified.

The Amending Act and Regulations introduce significant changes to the process of claiming progress payments which will impact the commercial terms of construction contracts moving forward as well as the administration of the contract during the delivery phase.  Industry participants should also take note of the introduction of more stringent penalties for offences committed under the Act, including the possibility of pecuniary penalties.

Please do not hesitate to contact us if your require us to assist in preparing for the impending changes.