Developing & Investing in the BIF Act World
If you are not a resident owner, and you contract with someone to carry out construction work or supply related goods or services, the BIF Act applies to you.
There are several parts to the BIF Act, but in this article we are going to just talk about security of payment (Chapter 3), which is currently the most far reaching part of the Act. Security of payment has been around since 2004, but previously payers were notified that the invoice they had received was a payment claim because to trigger the protections of security of payment the payment claim needed include the following words:
“This is a payment claim under the Building and Construction Industry Payments Act 2004.”
On receiving an invoice with the above words, most payers knew to take the payment claim seriously and would abide by the strict time frames for sending a payment schedule.
Under the BIF Act, payment claims no longer need to contain the endorsement and this makes almost any invoice that you receive, for construction work or related goods and services, a payment claim.
Why is receiving a payment claim so important?
If you receive a payment claim and do nothing and do not pay the claimed amount by the due date for payment, the following consequences could unfold:
The claimant issues court proceedings for a debt due and you will be unable to raise a counterclaim or defence;
The claimant applies for adjudication and you will be unable to provide a response;
The claimant suspends work after 2 business days’ notice; and/or
The Queensland Building and Construction Commission issues a fine to you for not providing a payment schedule.
What should you do?
If you receive an invoice for construction work or related goods and services and you intend to pay it on or before the due date, there may be no reason to send a payment schedule. However, if you dispute the payment claim you must send a payment schedule with 15 business days or earlier if required by your contract.
The payment schedule must:
Identify the payment claim;
State the amount you agree to pay; and
If you agree to pay less than the claimed amount, the reasons for withholding payment.
The reasons are vital and it is important that you include as much detail as possible, including reports. For example, if the work is defective and you have had a report on the defects, attach the report and refer to it in the body of the payment schedule.
Your reasons are so important because if the claimant takes the matter to adjudication, you will be limited to the reasons that you have provided in your payment schedule. You cannot raise any further reasons. Therefore to use an extreme example if you said your only reason for not paying was because you didn’t like the contractor’s T-shirt, you would be limited to that reason only, even if you had legitimate reasons for not paying.
Although there is no requirement to state the words “payment schedule” on your payment schedule, it is always good to be obvious when you want to the claimant to understand that your dispute is genuine and to be taken seriously.
It may seem like a lot of extra work, but by stating your reasons clearly and providing enough detail to support those reasons:
you could avoid an adjudication because the claimant may think twice about applying for adjudication when the odds are stacked against it; or
if adjudication is applied for, you are much more likely to convince the adjudicator that payment is not due.
It is again an example in life about putting the effort upfront to reap the rewards (or impending doom) later.
To find out more about security of payment and how to make sure your contracts are drafted to take into account the new legislation, call us today on 07 3128 0120 or email email@example.com.