The Building and Construction Industry (Security of Payment) Act 2021 (WA) (the “new Act”) will introduce new security of payment laws that aim to provide a higher level of protection for contractors in recovering payments.
The first stage of reforms will take effect on 1 August 2022 and the following stages will be effective from 1 February 2023 (Stage 2) and 1 February 2024 (Stage 3). It is important to note that all construction contracts entered into prior to 1 August 2022 will continue to be subject to the Construction Contracts Act 2004 which, as of the date of enforcement, will be referred to as the Construction Contracts (Former Provisions) Act 2004.
CHANGES TO BE IMPLEMENTED
The new Act introduces additional rights to payment under construction contracts and further avenues to recover payments owed to contractors.
The changes to be implemented include but are not limited to:
New Security of Payment Laws
- Payment timeframes where a payment claim is made will be shortened to 20 business days for the head contractor on a project, 25 business days for subcontractors, and 10 business days for certain types of home building works;
- If no payment schedule is provided, the respondent is required to pay the amount claimed and will be unable to respond to any application for adjudication;
- A rapid adjudication process will be implemented with the time period for bringing an adjudication application being reduced from 90 to 20 business days;
- There will be a prohibition of certain contract terms including “pay when paid” and unfair time bars; and
- There will be a right to suspend work for reasons of non-payment of progress claims.
Retention Trust Scheme
A retention trust scheme will now apply to construction contracts valued over $1 million and the minimum contract value for the scheme to be applicable will be lowered to contracts over $20,000 (by regulations).
To protect retention money in the event of insolvency, the money held or withheld under a construction contract will be held in trust for the benefit of the party who provided the money.
Expanding the Powers of Building Industry Regulators
Building industry regulators will now have the authority to exclude persons with a history of financial failure from the registered building contractor market. This is to prevent persons from contracting with incompetent or predatory businesses.
Further, persons who exercise intimidation or threatening behaviour to prevent another from exercising their rights under the new Act may be prosecuted.
With the introduction of legislative reforms with regards to security of payment in Western Australia, it is essential for contractors to become familiar with the additional rights that arise under the new Act, and for principals to be aware of the importance of providing a valid payment schedule when served a payment claim and managing their finances accordingly.
If you require further information, please see the Action Plan for Reform dated September 2021 and issued by the Department of Mines, Industry Regulation and Safety, or contact our office to speak to one of our lawyers to discuss how the new Act will apply to your construction contract.