Changes to Security of Payments Legislation
7th April 2021
by The Landscape Association
When a building contractor submits a payment claim to the homeowner under the Security of Payment laws, if the contract does not specifically specify when the progress payments become due and payable, payment can be made 10 business days after the payment claim was sent.
A homeowner who has been served with a payment claim can respond by providing the building contractor with a payment schedule. The homeowner must have a payment plan under specific timeframes. They are as follows:
If the homeowner fails to pay the building contractor on time, penalties apply, including the suspension of construction work under the construction contract and interest due on the outstanding balance of a progress payment.
By requiring progress payments, Security of Payment regulations are intended to provide a consistent cash flow for building and construction contractors. Until now, owner occupier building contracts were excluded from Security of Payment laws. This meant that builders (head contractors) who did residential building work could not make a payment claim against a homeowner (principal), even though the work was completed.
If the homeowner did not pay the head contractors, but the head contractors were required to pay subcontractors, this placed the head contractors in a tough financial situation.
Although the arrangement with a residential head contractor and a “mum and dad” homeowner is not the same as that between a head contractor and a subcontractor, residential head contractors face common cash flow problems to subcontractors, like insolvency, where they do not collect timely payment for construction work completed.
Adding owner occupier construction contracts under Security of Payment laws would guarantee the building and construction industry head contractors and subcontractors are paid on time for their jobs.
Only the person making a claim can start adjudication to work out the due amount (if any) for a payment claim. It’s an independent, informal process to help resolve a claim quickly and inexpensively. Any Authorised Nominating Authority (ANA) can give you an adjudication application form. Your application must:
Fees for adjudicators, expenses, and the Authorised Nominating Authority are all included in the charges. Fees may be reduced by keeping issues simple and parties’ submissions transparent, succinct, and full. If the adjudicator agrees otherwise, the complainant and respondent pay the same adjudicator fees.
You can contact ANA’s by clicking here.
Members are advised to closely study the Security of Payment legislation, as well as the whole process, before proceeding.
For more information regarding Security of Payment please click here.