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All of the state governments in Australia have legislation designed to protect builders, architects, engineers and sub contractors with their cash flow on construction works, not including home building where the owner/principal does intend to live in the new dwelling. The SOPA does apply where the services have been supplied by an architect or other qualified professional regardless of whether the services were for an owner who will live in the property.
In NSW the SOPA has been in operation since 1999 with varied experiences and mountains of litigation. In our March/April 2014 we mentioned submissions to the NSW government to introduce reforms and since the introduction of the new changes, we have contributed to criticism of some of those changes.
One of the significant changes is that there is no longer a mandatory requirement for Tax Invoices/Progress Claims to contain the previous mandatory wording “This is a progress claim issued pursuant to the Building and Construction Industry Security of Payments Act”. We have reservations about removing the need for this wording as it may create confusion in the marketplace as to when a Payment Claim is able to be pursued under the SOPA, and when it is not. Further, the existence of the mandatory wording served a quasi “warning” and “notice” to the recipient of the Payment Claim to treat the Payment Claim with some expediency. Now all payment claims/tax invoices will need to be treated with expediency on a presumption that the SOPA will, or may, apply.
The other criticism we have is that there are different mandatory time frames for payment of a payment claim depending on the “classification” of the Payer/Payee relationship. For example a Principal must pay a Head Contractor up to 15 business days, the Head Contractor must pay the Sub Contractor up to 30 business days of the date of receipt of the Payment Claim/Tax Invoice. The difficulty we anticipate is that it may not always be abundantly clear who pays what specific role on any particular building site, which may common on a site with a Principal [the Client] a developer [the Head Contractor or possibly the Client/Principal] and the Builder [who may be classified as a Sub Contractor in this scenario] and all the Sub Contractors.
It is therefore critical for Builders and others involved in construction works to ensure that the Building Contracts and related contracts include the new provisions and the parties are completely aware of the definition of their role under the new legislation. The consequences of any misunderstanding could have severe consequences, where payments are not made on time and the Payment Claim is pursued.