Further reforms to the Building and Construction Industry Security for Payment Act 1999 (NSW) (the Act) have been proposed with the Building and Construction Legislation Amendment Bill 2022 (the Bill) and in the Building and Construction Legislation Amendment Regulation 2022 (the Regulation). The Bill outlines various proposed amendments in relation to the role of adjudicators, the threshold of value of projects when triggering retention funds, and regarding the process of serving payment claims.
The following are the key proposed amendments:
- The introduction of an ‘adjudication review model’ will allow claimants and respondents to request a review of an adjudication determination.
- There will be a significant reduction in the threshold of the value of projects in triggering retention funds from $20 million to $10 million.
- Payment claims which are served on owner occupiers will need to attach a Homeowners Notice information to the payment claim to ensure homeowners understand the SOPA provisions relating to payment claims and to outline the consequences of non-compliance.
- Increasing the powers of adjudicators in engaging experts to investigate aspects relevant to the adjudication.
Adjudication Review Model
The adjudication review model will allow claimants and respondents to request a review of an adjudication determination.
However, there will be some restrictions in applying for a review of a determination. The determined amount must be:
- Equal or greater than $100,000 of the scheduled amount; or
- Less than $100,000 of the claimed amount.
While this amendment will allow parties to have a determination reviewed in specific circumstances, it will also add a layer of extra time and cost to the adjudication process. This is despite security of payment processes generally being considered a timely and less expensive means to resolve payment claim disputes.
Decrease in Threshold When Triggering a Retention Fund
The threshold of the value of a project which requires a retention fund will be reduced from $20 million to $10 million. This will allow for greater protection of retention funds held for the benefit of subcontractors, especially in circumstances where the head contractor becomes insolvent.
New Requirements for Payment Claims
The Bill has proposed changes with respect to the issuing of payment claims to homeowners, with the new requirement that there be a Homeowners Notice enclosed.
The Homeowners Notice will include information regarding the reason that the payment claim is being issued, the correct procedure in responding to the payment claim, and the consequences of disregarding the payment claim.
The Homeowners Notice has been proposed due to the level of uncertainty among homeowners who are unfamiliar with the security of payment regime. It is inferred that issuing a Homeowners Notice will allow homeowners to adequately understand the procedure under the security of payment regime and respond appropriately.
Strengthening the Powers of Adjudicators
The Bill endeavours to afford adjudicators further power in settling disputes. In brief, the powers will extend to adjudicators engaging an independent expert to investigate the relevant works and provide a report indicating their findings.
In light of the proposed amendments to the security of payment regime, it is crucial that those who are involved in the construction industry are aware of the proposed changes and, if implemented, take note of the date the legislation will be in effect.
Please click the following link to access the Bill and Regulation: