Introduction
The Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) governs security of payment in New South Wales, including progress payments and payment claims.
The effect of the SOP Act was modified by amendments to the Building and Construction Industry Security of Payment Regulation 2020 (NSW) (SOP Regulation) in 2021 (2021 Reforms).
The 2021 Reforms, contained in SOP Regulation sch 2, apply to construction contracts entered into after 1 March 2023
Application of the SOP Act
The application of the SOP Act is contained in SOP Act s 7, which states that the SOP Act applies to any construction contract unless exempted by SOP Act s 7(2)-(5). SOP Act s 7(5) states that the SOP Act does not apply to any construction contract or class of construction contracts prescribed by regulations for the purposes of the section.
The effect of SOP Act s 7(5) was modified by the 2021 Reforms.
Previously, SOP Regulation cl 4(1) as at 11 December 2020 stated that ‘owner occupier construction contracts are prescribed as a class of construction contracts to which the [SOP] Act does not apply’.
The 2021 Reforms repealed SOP Regulation cl 4 such that the SOP Act applied to owner occupier construction contracts: SOP Regulation sch 2(2).
SOP Act s 4(1) defines ‘owner occupier construction contract’ as ‘a construction contract for the carrying out of residential building work within the meaning of the Home Building Act 1989 on such part of any premises as the party for whom the work is carried out resides or proposes to reside in’. In essence, an ‘owner occupier construction contract’ arises whenever a homeowner contracts to build or renovate a home which they live in or intend to live in.
This means that one of the major effects of the 2021 Reforms is that builders and tradespeople now have a right to progress payments from owner occupiers under SOP Act pt 2 and can make payment claims against owner occupiers under SOP Act s 13. Previously, recovery of progress payments could only be through proceedings in a court or in the NSW Civil and Administrative Tribunal.
The 2021 Reforms also mean that the adjudication provisions in the SOP Act pt 3, div 2 also apply to ‘owner occupier construction contracts’ so recovery of payments may be more streamlined.
However, ‘owner occupier construction contracts’ were prescribed to be a class of ‘exempt residential construction contract’ under the SOP Regulation cl 3(1A) by the 2021 Reforms: SOP Regulation sch 2(1). The only effect of the designation as an ‘exempt residential contract’ under the SOP Act is that the due date for progress payments is different to those contracts which are not ‘exempt residential contracts’: SOP Act s 11.
A copy of the current SOP Act can be found here.
A copy of the current SOP Regulation can be found here.
If you require any advice on security of payment, including if you require any advice on progress payments, payment claims, or adjudication, please do not hesitate to contact us at admin@valorumlaw.com.au or voregan@valorumlaw.com.au. Our expert construction lawyers will be on hand to assist you.
The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.
Contributors: Harry Chen, Valentina O’Regan
