Changes coming for building industry
If the changes proposed by the Building Industry Fairness (Security of Payment) Bill 2017 come into effect it will mean some significant changes for participants in the building and construction industry.
The Bill seeks to implement reform in a number of key areas:
- the introduction of Project Bank Accounts (PBAs);
- making the Building and Construction Industry Payments Act easier to access;
- modernise and simplify the Subcontractors’ Charges Act; and
- enhancing the QBCC’s regulatory powers including increased penalties for non-compliance.
If the Bill is passed in its current form you can expect to see the following changes:
Project Bank Accounts
PBAs are trust accounts that Head Contractors will have to set up. The idea is that Principals will pay money under their construction contract with the Head Contractor into the PBA and the Head Contractor and 1st Tier Subcontractors (those that contract with the Head Contractor) will all get paid out of the PBA.
For those working on government building contracts with a value from $1 - $10million you will be caught in Phase 1 of the implementation of PBAs from January 2018.
Phase 2 implementation will be all building projects valued over $1million and is expected to commence in January 2019.
‘Building’ is defined in the Bill to mean “a fixed structure that is wholly or partly enclosed by walls or is roofed” so projects such as roads and bridges will not be caught by the PBA system.
The reaction to PBAs has been mixed with some viewing any extra protection for subcontractors, no matter how limited, as a good thing whilst others would be happier for the Night King himself to make an appearance.
Whichever side of the debate you are on, it is absolutely essential that you get on top of PBA requirements - particularly for head contractors - as failing to comply with the trust account requirements can result in financial penalties of up to 500 penalty units (currently $126.15 per unit so $63,075) or 2 years imprisonment for some breaches of the proposed legislation.
Building and Construction Industry Payments Act (BCIPA)
This has been a key piece of legislation utilised in the Queensland Building Industry for many years.
The Bill will repeal and replace BCIPA. Some of the changes to the current version of BCIPA do away with amendments which were introduced following inception of the legislation Key features
- you won’t need to include the endorsement (words to the effect of “this is a payment claim issued under the Building and Construction Industry Payments Act 2004) on any claim. All claims will be payment claims for the purposes of the legislation;
- no Reference Dates will accrue after termination of a contract, unless it specifically provides for them to continue to accrue;
- it will be compulsory to respond to a payment claim by issuing a payment schedule, regardless of whether or not the respondent intends to pay the whole amount of the claim. A failure to give a payment schedule will be a ground for taking disciplinary action under the Queensland Building and Construction and Commission Act 1991;
- if a payment schedule is not given to them the respondent will immediately become liable to pay the amount claimed;
- depending on the circumstances an adjudication application will need to be lodged within 30 or 40 business days;
- an adjudication response:
- will need to be lodged within 10 business days for a standard claim or 15 business days for a complex claim (a standard claim is an amount up to $750,000);
- cannot be lodged if no payment schedule was given; and
- if a payment schedule was given, cannot include any new reasons for withholding payment that were not included in the original payment schedule.
The proposed changes to BCIPA return the payment claim and adjudication process to a more streamlined system which should allow for quicker resolution of payment dispute.
The key thing to remember is that in order to take advantage of the system you must strictly comply with the requirements of the legislation, in particular in relation to time-frames.
Subcontractors' Charges Act
The Bill will repeal and replace the Subcontractors' Charges Act 1974 (SCA). The intention is not to drastically amend the legal effect of the SCA, but to modernise it and make it more user-friendly.
Monetary penalties will now apply for a failure to respond to notification of a claim of charge and a failure to give information if requested by the subcontractor.
Importantly, there will be no entitlement to a subcontractor’s charge to the extent it relates to money held in a PBA.
What to do now?
Changes like these can be challenging for business. They can require the implementation of new processes and it takes time to develop sufficient understanding to ensure you can both comply with any new requirements and participate in the benefits the Bill is seeking to deliver to the industry.
We encourage you to take the time to understand how these changes could either impact or benefit your business and contact our Construction Law Team for advice as required.