Significant changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOPA“) commenced on 21 April 2014 and apply to all construction contracts entered into after that day.

The changes, in brief, are:-

1. Maximum payment terms of 15 business days as between principal and head contractor and 30 business days as between head contractor and subcontractor now override any longer payment terms in a contract.
2. Payment claims no longer need to carry the magic words: “This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW)” unless the work for which payment is claimed relates to non-exempt residential work (mainly swimming pools and garages).  This could catch out those unfamiliar with the processes under SOPA.
3. A head contractor must now provide to the principal a supporting statement with each payment claim served under SOPA.  A failure to serve a supporting statement, or the swearing of a false or misleading statement, is punishable by fines and/or imprisonment.  The form of the supporting statement is available here. A head contractor must list all of their subcontractors and dates of those subcontractor’s payment claims in the supporting statement. The head contractor’s obligation to declare that all subcontractors have been paid extends only to those subcontractors directly engaged by the head contractor. The head contractor does not need to ensure that their subcontractors have paid further subcontractors or employees not directly engaged by the head contractor. The declaration does not cover amounts which are in dispute as between a head contractor and a subcontractor, but these amounts must be identified in the supporting statement as in dispute.
4. Retention funds will be the subject of further regulation likely requiring payment of these funds into a statutory trust account similar to the arrangement used by the rental bond board.   This is expected to result in a significant increase in the request of security by way of bank guarantee and/or surety bonds by head contractors and principals.

Construction contracts and operating procedures should be brought into compliance with the SOPA amendments and the date of the contract carefully considered if a SOPA dispute arises.