Security of Payment- BIF Act Changes
In late 2017, the Queensland Government enacted the Building Industry Fairness (Security of Payment) Act 2017 (“the BIF Act”). The BIF Act brings significant changes to the security of payment regime for the Queensland building and construction industry.
The Building Industry Fairness (Security of Payment) Act, incorporates the provisions of the Building and Construction Industry Payments Act 2004 (‘BCIP Act’) in Chapter 3 and the provisions of the Subcontractors’ Charges Act 1974 in Chapter 4. Although the BIF Act preserves the meaning and effect of the former legislation and most sections survive in their entirety, there are some important changes that every building industry stakeholder must be aware of.
Security of Progress Payments
Once in operation, the new security of payment provisions contained in Chapter 3 of the BIF Act will apply irrespective of the date of the building contract and there will be no transitional period from the BCIP Act.
1. Payment claim format:
The BIF Act no longer requires payment claims to carry an endorsement that the claim is made under the legislation, instead any written document that contains the following information will be considered a payment claim under the BIF (Building Industry Fairness) Act:
- identify the construction work or related goods and services to which the progress payment relates; and
- state the amount (the claimed amount) of the progress payment that the claimant claims is payable by the respondent; and
- request payment of the claimed amount.
A document bearing the word ‘invoice’ is taken to satisfy the requirement for requesting payment of the claimed amount.
2. Reference dates:
The BIF Act introduces a statutory reference date which may arise after the termination of a contract. This is a significant change to the current provisions in the BCIP Act.
3. BIF Act Payment schedule:
Submission of a payment schedule is now mandatory if a respondent does not intend on paying the full amount of the claim.
The time for submitting a payment schedule has also been extended to the earlier of:
a. the period stated in the contract for submitting a payment schedule or paying the claimed amount; or
b. 25 business days after the payment claim is given.
4. Adjudication Applications:
The BIF Act has altered the time frames within which an adjudication application must be made. These time frames are relevantly:
a. for an application relating to a failure to give a payment schedule and pay the full amount of the payment claim – 30 business days after the later of the due date for payment or the last day for receipt of the payment schedule;
b. for an application relating to failure to pay the full amount stated in the payment schedule – 20 business days after the due date for the progress payment; and
c. for an application relating to a payment schedule where the amount is less than the amount in the payment claim – 30 business days after receipt of the payment schedule.
The BIF Act has also removed the requirement for “second chance notices” to be provided before proceeding to adjudication. However, these provisions remain for applicants who seek to enter judgment for failure to provide a payment schedule.
5. Adjudication Responses:
The time for responding to an adjudication application remains unchanged and respondents are no longer able to raise new reasons for withholding payment which were not included in a payment schedule.
The changes introduced in Chapter 3 of the BIF Act are primarily focused on protecting the rights of subcontractors and suppliers. Accordingly, precaution needs to be taken to ensure all progress claims are treated as valid claims made under the BIF Act and processes are implemented to respond where full payment is not intended.
Developers and contractors should consider amendments to any building contracts which are expected to progress through the change over from BCIP Act to BIF Act to ensure compliant transition to the new security of payment regime.
The key changes to the subcontractors’ charges once in operation under Chapter 4 of the BIF Act will be:
1. Definition of work:
The definition of work under the BIF Act has been amended to remove any reference to the work being done or commenced upon land. The definition also introduces a specific inclusion for demolition, removal or relocation works.
2. Project bank accounts:
Contractors will have no entitlement to charge any monies held in a project bank account. This means that the subcontractors’ charges provisions will not apply to any work which forms part of a project subject to a project bank account regime.
3. Accompanying statutory declarations:
The requirement for statutory declaration to be provided in support of a notice of claim of charge by the claimant has been removed. However, the requirements for the amounts claimed to be certified by a qualified person remain. Strict compliance with the form of notices under the subcontractors’ charges provisions also remain and caution must be exercised by the claimants to ensure that they do not waive their rights by misreading the relevant requirements.
4. Contractor’s response:
The time provided for a contractor to respond to a notice of claim of charge has been changed from 14 days to 10 business days.
The broadening of the definition of “work” under the BIF Act has been extended to encompass subcontractors previously excluded by the SCA.
It is also imperative for subcontractors to be aware that charges will not provide them with any entitlement to recover monies held in a project bank account.
If you require further advice on the implications of the new security of payment legislation, please contact us or visited our dedicated Construction site for more information on your rights and obligations.
The above information is intended only as general information and should not be interpreted or relied upon for legal advice.