New NSW legislation helps tradies get paid on time.
Changes in the Security of Payment Act mean that since 1 March 2021, the Act also applies to contracts between homeowners and builders, and homeowners and trade contractors. The act had previously exempted owner/occupier homeowners, leaving the builder at risk. Ironically that same builder came under the Act for those jobs, allowing subcontractors to pursue their payments while the builder was unable to pursue the homeowner.
Before this legislative change, the most-used option for chasing nonpayment was the NSW Civil & Administrative Tribunal (NCAT), a months- or years-long process that can be expensive and is often seen as not worth the effort by builders.
Now builders and other tradies can use the Security of Payment Act in the case of disputed payments or non-paying homeowners to apply for an independent adjudication of the claim. If successful in this adjudication, even if the homeowner does not make submissions, an enforceable determination for the amount moves ahead regardless. The Security of Payment Act takes about five to six weeks to go from a claim for payment to a decision. Timings and procedures under the Act cannot be delayed, postponed, extended or adjourned.
Security of Payment law has strict requirements about how and when to serve valid progress claims and the time frames around various steps in the process.
Anthony Igra, director of Contractors Debt Recovery, said, “This change to the Act is long overdue. For years there was a central inconsistency because a tradie could use the Act to recover $3000 for painting a factory wall but couldn’t use it to recover $30,000 for painting Mrs Jones’s house. There is no reason why work for homeowners should carry more risk for contractors. Finally, the NSW Government has listened and made this long-overdue change.”
David Moses, managing director of Horizon, one of Sydney’s premier residential building firms, said, “This has been a long time coming, and we welcome the change. It will allow residential builders and their subbies to resolve disputes in an independent, fair and reasonable way and get paid much quicker – taking the emotion out of what is an emotional process for all involved. It will also force everyone to document everything better and make everyone accountable for their part in the collaborative process.”
Ross Gagic, director of builder CBS Build is still owed $130,000 on a job. His contract predates the changes and so he won’t benefit from them. “My client took advantage of the fact that the Security of Payment Act did not apply to primary residences. Despite a ream of correspondence agreeing to extra works, now he denies they are extra,” he said.
Mr Gagic has fenced off the property until he is paid as the contract allows this. “I’d rather have been able to resolve this via adjudication, get my money, and leave. Things will be much better when this change takes effect,” he concluded.
Retrospectivity built into the legislation means contractors will be able to serve a payment claim after 1/3/2021 in relation to contracts they entered into after 21/10/2019, the date the Act was amended. However, this retrospective period may face a future challenge in court.
For further information, visit www.legislation.nsw.gov.au/view/html/inforce/current/sl-2020-0504 or www.contractorsdebtrecovery.com.au