Laws are in place to ensure contractors and subcontractors get paid, meaning good news for subbies and bad news for the payer if not prepared. What’s more, the laws are changing meaning increased payment security for subbies and more legal red tape for construction businesses. By calling upon a construction law expert you can make sure you’re informed about relevant legislation ahead of time to avoid getting caught up in expensive and time consuming litigation proceedings.
Know your payment obligations
We understand that construction projects are a web of complications, meaning quite often where you end up isn’t where you intended at the outset. To add a new layer of complication, laws have tightened up around the payment of sub-contractors meaning more strict payment obligations for you.
RCR Construction ensure you are aware of the laws related to your circumstance, enabling you to effectively navigate the construction process without running into trouble and to support you if and when you do.
What You Need to Know
To get you started, here are a few things you need to know about your payment obligations for building services on your next construction project:
Your payment obligations are now more tightly regulated with the instatement of the BIF
Have you previously categorised payment claims by the presence or absence of a legal disclaimer? Did you know that invoices no longer require a legal disclaimer to be considered a formal payment claim under legislation? What that means is that every payment claim you receive should be taken seriously. What’s more, whether you are able to pay or not, you have just ten days from receipt of a claim to provide a payment schedule in response. Don’t agree with the payment claim? You still have just 10 days to submit your response. The stringent rules don’t stop there, failure to respond within the allotted time frame will put you at risk of legal action. Building Industry Fairness (BIF) Security of Payment regulations have turned things upside down in the construction realm and mean contractors need to take their payments very seriously.
BIF regulations mean a contractor has 15 days at most to respond to a payment claim before facing serious consequences
Building Industry Fairness law reforms mean contractors need to up their game when paying subcontractors. In future, ’10’ is the magic number; ten days is all you have to respond to a payment claim with a formal payment schedule and failure to do so within the specified time frame could land you in court.
Subbies need give you no notice in taking you to court according to BIF regulations
In the event you fail to fulfil your obligations to a sub contractor, you could end up defending yourself in court before you know it. The subbie is not required to give you further opportunity to make payment, nor to oblige an extended time frame for response to their payment claim. It is on the contractors to get up to speed on their requirements and obligations as the new laws around security of payments are stringent and provide even more layers of complexity to your operating environment.
It's imperative you submit all reasoning for a payment dispute up front. BIF laws mean you will have no further opportunity to expand your dispute when you wind up in court.
Did you know, in the event that you receive a payment claim that requires dispute, you are are still required to treat it as a standard claim, providing a response within the allotted ten day window? Consider your response as an opportunity to layout reasoning and evidence for withholding payment from the claimant. Be sure it is complete and accurate because in the event the payment claim is escalated to court, you will have no further opportunity to expand on your dispute.
It's a legal requirement to secure sufficient funds for every building project in line with BIF regulations
Before you jump into your next building project, make sure you’ve secured the funds to support it. In future, building funds must be secured in a Project Bank Account until payments are due and is enforced by the law. Make sure you seek the right advice to ensure you’ve met your PBA requirements and don’t wind up in trouble when payment claims roll in.
Not paying up? According the BIF laws the subcontractor can legally go over your head
Have you been paid by the employer and failed to pay the subcontractors you have engaged on a job? Under the Subcontractors’ Charges Act, subcontractors can go over your head and lodge a charge directly with the ultimate owner or employer for a project, even where there is a number of contractors in the chain of command. By doing so, subcontractors ensure a better return by directly approaching the entity that is funding the project.
What does this mean to you?
Upon receipt of the claim of charge, the employer is obliged to hold funds which have not yet been paid to you with respect to the subcontract. While held funds cannot be released to the subcontractor without your consent, should the case be escalated, the court can order direct payment, cutting you out of the equation.
Useful Visual Resources
At RCR Lawyers we are all about simplifying the law for our clients, which is why we’ve created these useful visual resources for you. Check out the links below.