NSW Security of Payment: Upcoming Amendments

The new amendments to the Building and Construction Industry Security of Payment Act 1999 (NSW) (**Act**) to are to come into effect on 21 October 2019 and will apply to construction contracts entered into after this date.

Here are the key changes that you should be aware of:

1. The removal of reference dates

The most significant amendment to the Act is the removal of the concept of a ‘reference date’. Reference dates are often the stem of confusion and failure to comply with those dates can often lead to a payment claim being invalidated.

Under the new regime, a claimant has a default entitlement to serve a payment claim on and from the last day of the month in which construction work was first carried out and then on and from the last day of each subsequent month. However, if a construction contract allows for an earlier date for the serving of a payment claim, the claim may be served on and from that date instead.

2. The re-introduction of security of payment identification

The new changes are seeing the re-introduction of the identification of a payment claim. From 21 October 2019, each payment claim must clearly state this it is made under the Act , for example:

“This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW).”

3. Payment claims & termination

Claimants will now be able to serve a payment claim either on or after the date of termination of the contract. It is important to note that this right cannot be excluded by the terms of the contract.

4. Earlier payment for subcontractors

The payment period for payments fulfilling a payment claim to a subcontractor will be reduced to 20 business days (currently 30 business days) after the payment claim has been made.

The payment period for payments from a principal to a head contractor will remain the same, being 15 business days after the payment claim has been made.

5. Withdrawing an adjudication application

The amendments to the Act will allow a head contractor or subcontractor to withdraw an adjudication application in circumstances where there will be two circumstances where a head contractor or subcontractor will be able to withdraw an adjudication application:

• an adjudication application has been lodged with a nominating authority, but before an adjudicator has been appointed; or
• an adjudicator has been appointed, so long as the application has not yet been determined and the respondent does not object to the withdrawal.

6. Setting aside part of an adjudicator’s determination

If necessary, the Supreme Court will soon be able to set aside part of an adjudicator’s determination (rather than the whole determination) if jurisdictional error is prevalent in only some of the issues covered by the determination.

Conclusion

There are many significant changes being made to the Act and it is important for parties participating in construction projects in NSW to consider how the amendments affect them and review their construction contracts to ensure that they are compliant for when the amendments come into effect.

This article was co-authored by Law Cadet, Amy Ong.

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