Earlier this year we reported on the upcoming amendments to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) that are set to change the construction industry. COVID-19 caused the Queensland Government to postpone the commencement of the amendments, but it appears the wait is over.

On 27 August 2020, the government confirmed the dates from which these amendments will apply.   We have set out when some of these key changes will kick in and what you need to know in terms of your current projects, contracts and commercial relationships.

From 1 October 2020, here is what you need to know:

On 1 October 2020, the following changes to the security of payment procedure will kick in:

  • Head contractors will be required to serve ‘supporting statements’ with their payment claims.  A supporting statement must identify each subcontractor, whether each subcontractor has been paid in full, and the reasons why any subcontractor has not been paid in full.  A failure to do so attracts a fine of 100 penalty units (i.e. $13,345) but does not affect the validity of the payment claim.
  • Respondents will be fined if, after giving a payment schedule to a claimant that schedules an amount payable, they fail to pay that amount by the due date for payment. A failure to do so carries a maximum fine of 100 penalty units, unless you are required to retain the amount due to a payment withholding request.
  • Claimants can serve ‘payment withholding requests’ on a party higher up in the contractual chain for unpaid adjudicated sums. This requires the higher party to retain a sufficient amount to cover payment of the adjudicated amount out of a related amount payable to the respondent.
  • Claimants can request a charge over property be registered in the Land Titles Office if a respondent fails to pay an adjudicated amount and the respondent (or a related entity) is the registered owner of the property upon which the construction work was carried out.
  • The QBCC now has the power to carry out ‘approved audit programs’, which must be published on the QBCC website. If you are selected for an audit, you must give the QBCC copies of documents they request and a failure to do so is punishable by a fine of up to 100 penalty units.
  • There is a new offence for giving false or misleading information to an official administering the BIF Act, punishable by a fine of up to 100 penalty units.
  • A respondent must now notify the registrar and provide evidence that they have paid an adjudicated amount within 5 days after making payment.
  • Adjudicator’s fees are now capped.
  • A claimant wanting to withdraw an adjudication application is now subject to strict notification requirements. A failure to adhere to the notification requirements is punishable by a fine of up to 200 penalty units (i.e. $26,690).

There are also a number of changes made to other legislative instruments such as the Building Act 1975 (Qld) and the Queensland Building and Construction Commission Act 1991 (Qld).

From 1 March 2021, here is what will change:

The amendments commencing 1 March 2021 mark the introduction of the long-awaited ‘statutory trusts’ regime to replace the existing ‘project bank account’ framework.  The new regime requires the creation of a ‘project trust’ and a ‘retention trust’ for eligible construction contracts and imposes strict obligations for parties operating the trusts.

We set out a general overview of the new regime in an earlier article, but a brief rehash of the types of contracts caught by the statutory trust changes follows.

Project trusts will be rolled-out in the following phases:

  • From 1 March 2021, project trusts will apply to eligible state government contracts of more than $1 million but less than $10 million.
  • From 1 July 2021, project trusts will be extended to eligible government and Health and Hospital Services’ building contracts of $1 million or more.
  • From 1 January 2022, project trusts will be extended to the private sector and local government for eligible building contracts valued at $10 million or more.
  • From 1 July 2022, project trusts will cover eligible building contracts worth $3 million or more.
  • On 1 January 2023, Project Trusts will be required for all eligible building contracts valued at $1 million or more.

There are of course contracts that project trusts will not apply to.  These include contracts between the State and a state authority, contracts for small scale residential construction work, contracts for maintenance work, contracts for building work services (administration, advisory, management or supervisory services) and contracts with less than 90 days until practical completion.

What you need to do now

Principals, head contractors, subcontractors and developers alike will be affected by these changes to the Queensland building and construction legislation.  It is crucial that your contract administration practice adapts to factor in these changes to the security of payment process and statutory trust regime.  A failure to account for the above changes may carry heavy consequences to construction projects and businesses.

For more information on the changes to the BIF Act, insofar as they relate to general contract administration, security of payment disputes or your current suite of contracts, please contact us.

Andrew Kelly | Partner | +61 7 3338 7550 | [email protected] 

Isabelle Scanlan | Associate | +61 7 3338 7915 | [email protected]

Sam Lenz | Law Graduate