Important Changes to the Building Industry

In 2017, the Queensland Parliament passed legislation to reform many aspects of the building and construction industry.  Although the Building Industry Fairness (Security of Payment) Act 2017 ("the BIF Act") commenced on 10 November 2017, many of the reforms are being commenced in stages.  Importantly, on 17 December 2018, the security of payment provisions commenced, repealing and replacing the Subcontractor's Charges Act 1974 ("the SCA") and the Building and Construction Industry Payments Act 2004 ("BCIPA"), "creating a one stop shop" security for payment regime in Queensland.

Although the fundamental concepts of the SCA and BCIPA endure in the BIF Act, there are a number of significant changes.  It is therefore imperative that those involved in the building and construction industry understand those changes and the potential effect on their dealings within the industry.

Payment Claims

Under the previous regime, payment claims were only valid if they specifically provided that they were made pursuant to BCIPA.  The BIF Act, however, removes this requirement.  Accordingly, payment claims will be valid so long as they identify the building and construction work and the value claimed.

Payment Schedules

Previously, payment schedules were generally required to be served within 10 days of receipt of a valid payment claim.  Under the new regime, a payment schedule must be issued within 15 business days of receipt of a payment claim, or by the expiry of the response period set out in the contract (whichever falls first).

Further, there are now serious consequences for non-compliance with payment schedule timeframes.  Under BCIPA, the recipient of a payment claim was afforded a second chance to issue a payment schedule if they failed to comply in the first instance.  There is no such provision in the BIF Act.  Accordingly, failure to comply with a payment claim (either by making payment or issuing a payment schedule on time) has serious consequences, including a fine of up to 100 penalty units ($13,055.00)  Further, a claimant may:

• commence court proceedings;
• make an application for adjudication; and/or
• suspend work until three business days after the payment claim has been satisfied.

Simplified Contractor's Charges Provisions

Although the fundamental concepts of the SCA have been incorporated into the BIF Act, these provisions have been simplified.  Further, unpaid subcontractors are now permitted to place a charge on payments owed to the debtor by a third party (for related building works).  For example, if Bob is unable to pay James' invoice of $1,000.00, but Bob is expecting payment of $1,000.00 from Alice, James can place a charge over the funds owed by Alice.

What's next?

The BIF Act aims to amalgamate and simplify the law relating to payments in the building and construction industry.  To simplify this process, the provisions are being rolled out in stages.  Early next year, further provisions will commence, including:

• amending the minimum financial requirements for licensees, including greater financial reporting obligations; and
• extending the requirement for Project Bank Accounts to civil building and construction projects.

If you would like further information about the newly introduced security for payment provisions, or any of the BIF Act provisions and their effect on you, contact one of our local experts today on 07 4963 2000 or via our online contact form.