King & Wood Mallesons

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Owners and contractors beware — any claim can be a security-of-payment claim

By Adam Wallwork and Ziggy Napier

The Building and Construction Industry Security of Payment Amendment Bill 2013 has been introduced into NSW Parliament. The bill seeks to amend the Building and Construction Industry Security of Payment Act 1999 with respect to how payments are made under future construction contracts. Those construction contracts that are already on foot at the date on which the bill is passed will not be affected.

The bill removes the requirement that a payment claim state is a ‘payment claim pursuant to the Building and Construction Industry Security of Payment Act [NSW] 1999’. This means that any payment claim can be the basis for action under the Security of Payment Act. All principals and head contractors will need to implement management processes to ensure that all payment claims are scrutinised carefully and, where relevant, managed appropriately and in compliance with the legislation.

The act currently allows parties to a construction contract to agree when payments are to be made under a construction contract. The bill will change this by imposing maximum time limits on when progress payments are to be made. In the case of a progress payment to a head contractor, it becomes due and payable no later than 15 business days after the payment claim is made, and in the case of a progress payment to a subcontractor it becomes due and payable no later than 30 business days after the payment claim is made. A provision of a construction contract will have no effect to the extent it allows payment of a progress payment at a later date…

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