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Legal Update – Security of Payments Act & Residential Building Contracts

By Johanna Woodland.

From 1 March 2021, the Building and Construction Industry (Security of Payments Act) 1999 (NSW) (SOPA) now applies to owner occupied residential building contracts. For a basic outline of the SOPA, click here to view our blog.

For the purposes of this update, it is enough to say that the SOPA puts in place a strict and quick regime for the submission of building Payment Claims, a form of tax invoice, and disputes about them to be resolved.

The changes to the Act which came into effect on 1 March 2021 mean that builders and contractors who perform residential work for owner occupiers, will be able to take advantage of the SOPA’s regime and recover outstanding monies quickly under owner occupier contracts.

An owner occupier contract means a construction contract for the carrying out of residential building work within the meaning of the Home Building Act 1989 on a premises where party for whom the work is carried out resides or proposes to reside in.

A payment claim:

(a)  must identify the construction work (or related goods and services); and
(b)  must indicate the amount claimed to be due; and
(c)  must state that it is made under the SOPA.

If a builder under an owner occupier contract issues a valid Payment Claim, it becomes due and payable either when the contract states, or if the contract is silent on the matter, after 10 business days.

Once served with a Payment Claim, if the owner occupier does not agree with it they have a chance to dispute the Payment Claim by way of a Payment Schedule which sets out which parts of the Payment Claim are in dispute and why.

If after being served with a Payment Claim the owner occupier does not provide a Payment Schedule to the builder within the earlier of the time required by contract or 10 business days after the Payment Claim is served, the owner occupier becomes liable to pay the claimed amount to the builder on the due date. If the owner occupier becomes liable to pay the claimed amount, the builder can then enforce the Payment Claim through an adjudication process or the Courts.

There are strict rules and short time limits which apply to builders and owner occupiers to whom the SOPA applies, so it is important that you seek legal advice urgently if you are not sure of your obligations or rights.

Contact our experienced litigation team on 4951 8199 or click below to get started.

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