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Building & Construction News Alert: New Building Code to contain Security of Payment provisions

News Alert 15 December 2016

On 2 December 2016, the Federal Government’s legislation to reinstate the Australian Building and Construction Commission came into effect. An important part of the legislation is establishment of a Building Code which will apply to participants in Commonwealth funded building projects. Failure to comply with the code can result in an entity being ineligible to tender or contract in relation to Commonwealth projects. While most of the Code’s provisions are aimed at curbing the powers on unions in workplace agreements, one consequence of negotiations with cross-bench senators is that the Code will also enforce compliance with security of payment legislation.

To comply with the security of payment provisions in the Building Code, an entity will need to:

  1. comply with all applicable laws and other requirements relating to the security of payments that are due to persons;
  2. ensure that payments which are due and payable by the code covered entity are made in a timely manner and are not unreasonably withheld; 
  3. have a documented dispute settlement process that details how disputes about payments to subcontractors will be resolved, and must comply with that process; 
  4. as far as practicable, ensure that disputes about payments are resolved in a reasonable, timely and cooperative way; 
  5. comply with any requirements relating to the operation of any project bank account or trust arrangement that apply to the code covered entity in relation to Commonwealth funded building work; 
  6. report any disputed or delayed progress payment to the Australian Building & Construction (ABC) Commissioner and the relevant funding entity as soon as practicable after the date on which the payment falls due.

While most of these obligations only require entities to comply with existing laws, the requirements to have a documented dispute settlement process, and to report disputed or delayed progress payments to the ABC Commissioner and the relevant funding entity, are new obligations.

The Code also provides that entities must not take steps to coerce a contractor, subcontractor or consultant to exercise or not exercise rights arising under state Security of Payment legislation.


Tony Mylne, Partner
Brisbane

Joshua Liddle, Solicitor
Brisbane

News Alert 15 December 2016
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