Key Takeaways

Recent changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) prevent contractors from claiming any entitlement to progress payments for unlicensed residential home building or specialist work or uninsured building work under the Home Building Act 1989 (NSW) (HBA).

While the changes to the SOPA came into effect on 20 August 2024, the amendments retrospectively apply to contracts entered into before that date. Contractors must now ensure their licences and Home Building Compensation Fund insurances are up to date and comply with the HBA.

Background

Broadly speaking, the SOPA protects contractors undertaking construction work in New South Wales by entitling them to claim progress payments for work performed under a construction contract. 

Prior to the recent changes, while homeowners could raise unlicensed or uninsured contracting as a reason for withholding payment in a payment schedule, contractors would still benefit from the protections available under the SOPA to claim payment for work which was otherwise unlawful under the HBA (Sunshine East Pty Ltd v CBEM Holdings Pty Ltd [2023] NSWSC 744).

The amendments introduced subsection 8(2) to the SOPA as follows:

“(2)  A person is not entitled to a progress payment under subsection (1) if the construction contract—

(a)  does not comply with the Home Building Act 1989, section 4, or

(b)  involves construction work that is residential building work done in contravention of the Home Building Act 1989, section 92.”

Section 4 of the HBA prohibits any unlicensed person undertaking residential building work or specialist work. Section 92 of the HBA prohibits any person from undertaking uninsured residential building work (subject to certain thresholds).

Significantly, the amendments to the SOPA now remove the loophole between the SOPA and the HBA, preventing contractors from claiming progress payments under the SOPA for work otherwise prohibited under HBA.

Further information / assistance regarding the issues raised in this article is available from the authors, Sarah Hammond, Partner, Emily Barnett, Lawyer, or your usual contact at Moray & Agnew.