Getting paid retentions has been a long and frustrating issue for most subbies.
Frequently:
the contract was so confusing that you had a better chance to guessing next week’s lotto result than knowing when the end of the defects liability period was; and
the confusion and mystery was happily nurtured by unscrupulous head contractors,
because if you didn’t claim for your retentions, then they didn’t have to pay them and if they didn’t have to pay retentions, well then there was more profit for the head contractor.
That is, until now.
On 17 December 2018 along with all of the security of payment changes, the Building Industry Fairness (Security of Payment) Act 2017 (the BIF Act) also included one change to the Queensland Building and Construction Commission Act 1991. Now, if retentions are held under a contract there is a positive obligation on the payer to:
notify you of the end of the defects liability period; and
pay your retentions to you.
What’s more, if the payer doesn’t notify you or pay your retentions, the payer could receive QBCC fines and penalty units.
These three sections force a cultural change in our industry. It is not only a positive for subcontractors, but also for those head contractors who have always paid their retentions, or have not withheld retentions at all. Now the playing field is more even and fair for everyone.
Below we have set out a summary of how the new sections 67NA–67NC work:
1. Statutory defects liability period
The new sections state that if retentions are being withheld under your contract and the end of the end of the defects liability period is not stated, the defects liability period will be 12 months from day of practical completion for that contract. That’s right, the actual contract, so if your contract is a subcontract it will be 12 months from when you reached practical completion for your subcontract works.
2. New notice of end of Defects Liability Period
For contracts with retentions, there is now a positive obligation on the payer to notify the claimant with an approved form 10 business days before the end of the defects liability period of:
the date for the end of the defects liability period;
the amount of retentions that the payer is going to pay; and
the when the payer proposes to pay the claimant.
The approved form is at: http://www.qbcc.qld.gov.au/sites/default/files/S67NC_Notice_End_Defect_Period.pdf.
If the payer does not notify the claimant, it is an offence attracting a maximum of 100 penalty units (the equivalent of $13,055).
3. Obligation to pay
Probably the most fundamental of the changes, is that there is a positive obligation on the payer to pay the retentions on or before the due date for payment, if retentions are held under the contract. The payer can be fined up to 200 penalty units (equivalent to $26,110) or 1 year’s imprisonment, if:
the payer does not pay the retentions;
the payer does not have a reasonable excuse;
the retentions amount has not been paid into court to satisfy a subbies’ charge; and
the retentions are not the subject of a dispute between the parties.
4. What if I retain retentions?
If you retain retentions from your own sub-subcontractors the same payer rules are going to apply to you (including the need to use the approved form, the penalties and the fines). However, if the end of the defects liability period under your sub-subcontract is dependent on the end of the defects liability period under your subcontract, then the Act states that:
you must give your own notice of the end of the defects liability period for your sub-subcontract within 5 business days of receiving the notice from the head contractor under your subcontract.
Do you want to learn more about the BIF Act changes?
Our online course covers getting paid and paying under the BIF Act in a series of simple easy to follow videos. It also includes for you downloads of process documents created by our lawyers so you don’t have to. To find our more go to https://courses-arbuildinglaw.thinkific.com
