The Queensland Government has confirmed further changes to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) this month.
You’d be forgiven for not easily finding these amendments, as they have been buried in amongst amendments in the Plumbing and Drainage Bill 2018.
There are some interesting amendments here, but we anticipate that there will be more amendments to come before BIFA is scheduled to come into force in December.
We have highlighted the significant issues below, and how they might affect players in the industry.
Payment schedules
The time for providing a payment schedule will be 15 business days after the payment claim is submitted (unless the contract imposes an earlier time frame).
The new amendment gives principals and head contractors 5 business days more than under the current BCIPA regime (10 business days).
The original proposal under BIFA was 25 business days after the date of the payment claim, which many in the industry viewed as problematic because, if the QBCC Act applied, a payment schedule could be issued after the due date for payment. If you have amended your contracts in line with the proposed BIFA timeframe of 25 business days, this clause will now be worth another look.
Contracts will need to be drafted very carefully to ensure the payment terms align with the security of payment provisions. If the payment provisions are inconsistent with BIFA or the QBCC Act, then the due date for payment will fall before the due date for the payment schedule (the current default timeframe for payment under BIFA is 10 business days after the date of the payment claim).
We anticipate that this potential for discrepancy may be looked at in more detail before BIFA commences.
Project Bank Accounts
The rest of the changes relate to the operation of project bank accounts (PBAs).
Ability to withdraw funds
A new section has been included to make a head contractor liable to make payments to the subcontractor in certain circumstances, and therefore limiting its ability to withhold or withdraw funds from the PBA.
This now includes amounts certified, stated in a payment schedule or assessed as payable. Previously the requirement was just amounts ‘due to be paid’. This means that for example, where a head contractor may have previously had an entitlement under the Contract to withhold amounts for any reason, it will not be entitled to do that unless those amounts are included in the payment schedule.
Practically, the amounts that the head contractor would want to withhold would likely be held in the disputed funds account, but this would mean they are inaccessible by the head contractor until the dispute is resolved and the appeal period has expired (which could be a very long time – many months or even years).
Who is a supplier?
PBAs do not apply to suppliers. The new amendments arguably restricts which subcontractors can be considered as suppliers and therefore broadening the obligations of a head contractor to effect PBAs for those subcontractors.
The previously proposed amendments defined who is a supplier by describing the goods to be supplied. The new amendments have taken a different approach by stating that a subcontractor will not be a supplier if it is required to hold a licence or authority to lawfully supply goods or services under the Building Act, Electrical Safety Act, Plumbing and Drainage Act, Queensland Building and Construction Commission Act, or any other Act prescribed by regulation. This means that if the head contract is a contract for building work, then any first tier subcontractor (regardless of whether or not they are carrying out building work) is entitled to the benefit of the PBA (unless they are a supplier).
This was a much needed clarification to those trades which did not specifically fall within the QBCC Act and are now more clearly covered by the protection of PBAs.
Penalties
Introduction of maximum 2 year imprisonment penalty for head contractors who withdraw any part of a retention amount held in the retention trust account where it is not entitled to do so.
Other amendments
Subtle amendments to terminology which:
- makes it clearer that all of the different PBAs are intended to be trust accounts, with the head contractor and subcontractors being the beneficiaries;
- flips the previous position which stated that the moneys that the subcontractor is “entitled to be paid” must be paid into the PBA. The new position is that any amount that the head contractor is “liable to pay” must be paid into the PBA. This wording is subtle, but has a larger practical impact.
Changes to the administrative requirements for PBAs, including information required to be provided to each party.
Non-conforming building products
A number of amendments have been made to clarify that engineers and architects will be responsible for building products in Queensland if they specify that the building products must be associated with the building.
Until now, it has been the subject of debate within the industry as to whether or not engineers and architects were to hold the same responsibility as builders and other trades. These amendments now put the issue beyond doubt.
What next?
The amendments to the QBCC Act regarding non-conforming building products are now in force (from 11 September 2018).
The BIFA amendments are still anticipated to come into effect on 17 December 2018, although the government still has not officially confirmed this date.
Once the BIFA amendments come into force, they will apply to all payment claims made from that date even for contracts entered into before that date.
It is important that you ensure the contracts you are entering into now will be compliant once the amendments come into effect.
Currently PBAs are only required to be used on certain government projects, but they are still on track to be introduced for private projects in 2019.
If you are having issues with security of payment, or would like more clarity about how the changes will affect you and your business, email us at hello@helix.legal – we would love to talk to you.
If you’d like to join the discussion about changes to the industry, please register for our Construction Innovation event on 27 September 2018 at the home of Helix Legal at The Capital. We have had the pleasure of meeting and working with the new thinkers in the industry and we want to introduce you. The use of drones is just one of the fresh innovations you will hear about.
Not intended as legal advice. Read full disclaimer.