Upcoming Changes to the Queensland Construction Industry
At the end of October last year, the Queensland Government unanimously passed legislation that will see a massive overhaul of the Queensland construction industry by the introduction of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) the (‘BIF Act’).
This is the most significant change to the Queensland building and construction industry since the Building and Construction Industry Payments Act 2004 (Qld) (‘BCIPA’) amendments came into force in December 2014.
Key provisions of the BIF Act are expected to commence any day now (awaiting proclamation by the Queensland Government) so all participants in the Queensland construction industry need to be aware of the new changes as they will impact the way that payments will be made between parties.
The key changes to the Queensland building and construction industry under the BIF Act include:
- The introduction of project bank accounts from the beginning of 2019 onwards for projects over $1 million in the private, commercial and government sector;
- The BCIPA and the Subcontractors’ Charges Act 1974 (Qld) will be repealed and consolidated into the new BIF Act;
- Provisions in the Queensland Building Construction and Commission Act 1991 dealing with excluded individuals and financial records will be amended; and
- Changes to the penalties regime will see hefty monetary fines imposed for non-compliance and the maximum penalty of imprisonment applies for particular offences.
Mandatory project bank accounts
Project bank accounts will require head contractors to hold funds on trust for contractors and tier one subcontractors under a building contract. There are strict requirements for the operation of the project bank accounts and sever penalties will be imposed on head contractors who fail to establish the required bank accounts within 20 business days of entering the first subcontract; and for administering the trust accounts incorrectly.
The introduction of project bank accounts will most likely create an extra expense for head contractors as they may need to engage additional employees to administer the three separate project bank accounts required for each project. The current proposed amendments do not allow the head contractor to recover these costs from the principal or subcontractors. In this regard, this will most likely have to be absorbed into the head contractor’s margin on projects over $1 million.
Changes to payment claim processes
One of the major changes under the BIF Act relates to payment claims issued by subcontractors to head contractors.
Since 2004, the process for issuing payment claims or ‘progress claims’ and related disputes have been governed by the BCIPA. However with the repeal of the BCIPA, a new security of payment regime has been established.
Key changes to the process of payment claims include:
- A payment schedule must be provided no later than 25 business days after the day the payment claim is given to the respondent unless a shorter period is specified under the relevant construction contract (the shorter period will be considered the valid response period). If no payment schedule is received, the head contractor will be liable for the full amount claimed in the subcontractor’s payment claim.
- A payment claim no longer has to be endorsed under BCIPA as previously required. Instead, any claim for payment may potentially be a payment claim and should be regarded as such including tax invoices. A payment claim will only need to:
- Identify the construction work to which it relates;
- State the amount being claimed;
- Request payment of the claimed amount in writing (the document must include the word ‘invoice’); and
- Anything else stipulated in the regulations which are yet to be released.
- If payment is not made by the due date or a payment schedule is not provided in response to an unpaid payment claim, it will be considered an offence.
- Second chance payment notices will be removed allowing claimants to immediately apply for adjudication or seek summary judgement where payments or payment schedules have not been received by the due date.
- An adjudication response cannot introduce any new reasons for withholding payment that were not included in the payment schedule.
While the current regime under the BCIP Act still applies until the BIF Act is proclaimed, the changes once in operation will affect every stakeholder in the Queensland building and construction industry.
It should be noted that as the legislation and regulations are still open for debate and review by various industry stakeholders, the information contained in this article should be considered a guide only and specific legal advice should be sought.
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