Posted by Ben Robertson | 13 January 2021 | Civil Contractors and Construction
From 1 March 2021, in what is a significant reform for the residential construction industry, residential builders will be able to utilise the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘the SOP Act’) to obtain outstanding payments from owners.
This is a ‘gamechanger’ for residential builders and allows them access to a paper based adjudication system for resolution of payment disputes. The paper based adjudication system through the SOP Act is cheaper and quicker than proceeding through the tribunal and court systems. Builders will welcome this reform and owners will need to be on their toes to ensure that they don’t get caught out not complying with the strict timeframes for responses under the SOP Act.
From its inception the SOP Act has excluded the majority of residential builders from the payment recovery process set out in the SOP Act.
The SOP Act specifically did not apply to those construction contracts where an owner resided in or intended to reside in the residential premises being constructed.
The Building and Construction Industry Security of Payment Regulation 2020 (‘the SOP Reg’) which was published on the NSW legislation website on 1 September 2020 will effect access for residential builders to the SOP Act from 1 March 2021, and enable residential builders to use that legislation to obtain outstanding payments from owners whether or not the owners reside in or intend to reside in the residential premises being constructed.
Under the current regime, any disputes in relation to progress claims for residential building works are resolved in the NSW Civil and Administrative Tribunal, which has jurisdiction to determine claims up to $500,000, or the applicable court for any claims that exceed that amount.
Typically, the system involves many months of case management and culminates in a hearing to resolve the dispute. Debt recovery proceedings can also be complicated by owners seeking to cross-claim for amounts they allege may be owing to them (e.g. for alleged defective works), and the legal costs in advocating the matter, preparing evidence and running a hearing can be prohibitive to many builders.
Enter the system under the SOP Act from stage left to the rescue. Under the SOP Act there is a prescriptive system for:
The adjudication system through the SOP Act is often commonly referred to as a ‘pay now and argue later’ system, and is designed to deliver a quick and cost effective interim resolution of payment disputes. Following an adjudication determination any payments must be made within five business days, and if payment is not made an adjudication certificate can be obtained from an adjudicator, filed in court as a judgment debt and enforced.
Builders should ensure that:
Nexus can provide advice to you in relation to:
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22 March 2021 | Civil Contractors and Construction | Ben Robertson
With recent amendments to the Act, it is crucial for builders and suppliers to understand these changes and how to best use the Act to benefit their cashflow. Through our SOP webinar is a great introduction for those seeking to better understand the Act and how they can use it to support their business.
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