New laws

BIFOLA webinar Q&As

You can watch our Changes to Security of Payment Laws in Queensland Webinar, read the webinar transcript, download the PowerPoint slides used in the webinar or take a look at the full list of audience questions and our answers below.

When do BIFOLA reforms start?

Will projects that start before 1 October 2020 be required to follow the BIF Act or BIFOLA if the project runs past 1 October 2020? Will it change half way through the project or only start with projects after 1 October 2020?

The BIF Act continues to apply.

BIFOLA is simply an amendment act which makes changes to the existing BIF Act laws (as well as the QBCC Act, Building Act and several other Acts) – it does this by omitting certain provisions in the BIF Act and/or replacing them with new or changed provisions.

There are different commencement dates and transitional requirements for the changed/updated laws in the BIF Act. In relation to the changes commencing on 1 October 2020, these will all need to be complied with from that date including for existing projects and construction contracts.

The next phase of trust accounts and changes to the existing PBA framework does not commence until 1 March 2021. The QBCC will provided detailed training and guidelines for contractors that are impacted by the existing Project Bank Account (PBA) requirements.

For other Security of Payment changes introduced by BIFOLA that are commencing on 1 October 2020 please see the QBCC website for transitional requirements: https://www.qbcc.qld.gov.au/new-laws/changes-payment-laws.

Contracts

A lot of subcontractors submit pro forma 5 day terms on their invoices despite signing a 14 day subcontract agreement. Is it correct that the original agreement overrules the subcontractor pro forma?

Payment terms within your subcontract agreement should be followed (unless they are invalid and/or void under the BIF Act). The QBCC Act provides maximum payment terms for some building contracts, which for subcontractors is 25 business days, see section 67U.

If the contract does not provide for a due date for payment or the provision in a contract is invalid, there is a default due date provided for in the BIF Act. Section 73(b) states that, if the contract does not provide for the matter, the due date is the day that is 10 business days after the day a payment claim for the progress payment is made.

Covid-19

How are financials for licence renewals going to be treated due to the COVID-19 challenges?

QBCC licensed contractors are still required to provide their annual reporting information to the QBCC on or before the annual reporting date.

Providing information about a licensees Minimum Financial Requirements is not required at the time of renewal.

Developers

How will developers be informed of the new legislation of their responsibilities in the process?

The QBCC has commenced and will continue with targeted webinars, social media campaigns and direct communication to licensees on the new requirements.

The QBCC also has established relationships with key industry bodies and are working proactively together to inform and educate the industry on the new requirements. Regular meetings are held with these external stakeholders. The QBCC participates in stakeholder hosted events and provides information and collateral that can be shared with their members.

Progress payments

If the contractor pays the subcontractor on the last day due for payment but it does not get into the subcontractor's bank account until the next day; is that payment considered late?

Technically yes, payment should be received by the claimant by the due date for payment. This should be factored in when organising payment of invoices.

Non-payment by resident owners

What protection is available for contractors in the residential sector against non-payment from the home owner?

Existing payment protections continue to apply.

If a contractor is involved in a payment dispute or is experiencing non-payment from a resident home owner they may consider:

  • reviewing the terms of their contract and taking action to suspend work if their contract allows
  • seeking independent legal advice on their enforcement options
  • commencing QCAT or court proceedings depending on the amount in dispute or that is owed.

However all subcontractors who are engaged by a head contractor, regardless of whether they are working on a domestic or residential building project, are protected by the laws in the BIF Act and can access dispute resolution options including adjudication, monies owed complaints, QCAT or court.

When is Queensland going to follow Tasmania and include resident owners in the payment claim process instead of protecting deliberate non-payers?

The legislation that the QBCC administers is written and set by the Queensland Government. Prior to the finalisation of the BIFOLA reforms, the Queensland Government conducted extensive research and consultation with industry where it was found that the biggest issue of non-payment within the industry is with higher risk, larger entities rather than resident homeowners.

If you wish to provide feedback on the legislation please contact the Department of Housing and Public Works via securityofpayment@hpw.qld.gov.au or through your local member of Parliament.

Supporting statement

Does this new change regarding supporting statements relate to invoices not paid after 1 October 2020 or only on invoices submitted after 1 October 2020?

The supporting statement requirements apply to invoices given by the head contractor on, or after 1 October 2020.

This supporting statement must list amounts that are owed and have not been paid to subcontractors up to the date of the payment claim (and therefore it may include amounts that are owing to subcontractors prior to 1 October 2020).

Is it correct that the supporting statement changes do not apply to residential construction?

A supporting statement is not required when giving a payment claim to a resident owner. (Section 61(2)(b), BIF Act).

The specific wording of the provision is that the requirements do not apply to "a construction contract for the carrying out of domestic building work if a resident owner is a party to the contract, to the extent the contract relates to a building or part of a building where the resident owner resides or intends to reside”.

Therefore, it is worth noting that supporting statements are required to be given by a head contractor for residential construction work where the principal is not a resident owner (for example: work on an investment property or work for a developer).

Will a supporting statement mean the builder has to release detailed contracts and costings between builder and subcontractor to the developer?

No. The supporting statement must declare that all amounts owing to subcontractors at the time of giving the payment claim have been paid OR for each subcontractor who has not been paid, the supporting statement must state:

  • the name of the subcontractor who has not been paid
  • the amount still unpaid
  • details of the unpaid payment claim (e.g. the invoice of payment claim number)
  • the date the subcontractor carried out the work and
  • reasons the amount was not paid.

Supporting statement templates are available on the QBCC website.

What is an unpaid amount for a supporting statement? When or how should milestone payments be managed in the supporting statement? E.g. If a milestone is not achieved?

The supporting statement must state information about subcontractors who have not been paid the full amount ‘owed’.

An amount owed may be:

  • the full claimed amount (when no payment schedule has been given)
  • the scheduled amount (when a payment schedule has been given in response to a payment claim)
  • the adjudicated amount (if relevant)
  • and other amounts that may be owed such as from a final and binding decision from a dispute resolution process or an amount ordered to be paid by a court.

With regards to milestone payments under a contract, the contract would detail when a payment claim can be given (the reference date). If you receive a payment claim for a milestone payment and do not believe that this milestone has been achieved, you are required to respond with a payment schedule. In this situation, the supporting statement should only list the milestone payment if you have not paid either the full amount claimed or the scheduled amount (whichever applies).

Does the QBCC website have a template for a supporting statement?

Yes, supporting statement templates are available on the QBCC website. Note, the law does not mandate a particular form or template and this is only a suggested template.

I was unable to find the Supporting Statement Template. Has that been uploaded?

The supporting statement templates are published on the QBCC website.

Project trust accounts

Is there any change to the requirement for annual audits on project trust accounts like NSW retention trust accounts?

Under the new trust account framework, the QBCC has increased powers and oversight of trust accounts and head contractor activity relating to project trusts.
There are new reporting obligations on trustees to provide the QBCC with notification on opening, closing, name change of a trust account, monthly bank reconciliations and regular review of the trust account by an independent auditor.

The next phase of trust accounts and changes to the existing PBA framework does not commence until 1 March 2021.

The QBCC will provided detailed training and guidelines for industry throughout implementation of the project trust requirements.

Payment Withholding Request

Can a higher party pay a claimant or only hold payment from the respondent?

A higher party should not pay the claimant directly. Upon receiving a Payment Withholding Request form, the higher party is required to withhold payment of an amount equal to the amount in the withholding request if they are in fact the higher party and still owe the respondent money under the relevant construction contract.

If/after the respondent pays the adjudicated amount the claimant, the higher party will be advised and they may then release the withheld amount and pay it to the respondent.

Amounts can be withheld over more than one payment claim, including from final payment claims and retention amounts.

If the remaining amount the higher party is liable to pay to the respondent under the construction contract, is less than the unpaid adjudicated amount, the higher party must withhold all the remaining amounts from payment to the respondent.

If the respondent is self-funded, who is the higher authority - QBCC?

In the circumstances where there is no higher party, a payment withholding request has no effect and cannot be used.

This may also be the case where a payment withholding request is given to a person or entity that is no longer the higher party because the contract has ended or all liable amounts have been paid to the respondent (who owes the claimant the adjudicated amount).

A person that receives a payment withholding request that is not or no longer the higher party, must notify the claimant that they are not the higher party within 5 business days of receiving the request. There is a template notice provided on the QBCC website.

How do you deal with situations where the respondent claims they can't pay the claimant without the money due by the higher party?

The payment withholding request only relates to an unpaid adjudication amount; and the adjudication decision has determined the amount is due to be paid for an earlier payment claim. It is reasonable to expect the respondent has previously claimed and been paid by the higher party for this earlier completed work/earlier payment claim and should therefore not be reliant upon future payments from the higher party. As soon as the respondent pays the claimant the adjudication amount, the higher party is required to be advised and may release the withheld amount.

QBCC licensees are required to manage their finances effectively so that they are able to pay debts if and when they fall due. This is an existing minimum financial requirement for holding a contractor’s licence (Section 17N, QBCC MFR Regulation).

Charge over property

Does the charge over property law apply to related entities? For example, the developer owns two entities/Property Trust and Pty Ltd developer entity?

The charge over property may only be placed over the relevant property (where the work has been completed or the goods or services supplied) for the adjudication amount.

A claimant may only register a charge over property if the respondent or a related entity for the respondent are the registered owner of the relevant property (Section 100B(1)(e), BIF Act).
The charge cannot be placed over any other properties owned by the developer or their related entities.

Relevant property for an adjudicated amount, means the lot— (a) on which the construction work, related to the adjudicated amount, was carried out; or (b) to which the related goods and services, related to the adjudicated amount, were supplied. (Section 100A, BIF Act).

Related entity may include:

  • a family member, e.g. spouse; parent; grandparent; brother; sister; aunt; nephew; niece; head contractors or spouses’ child or grandchild; spouse of any family member
  • a majority shareholder, director or secretary of the corporation (company) or related body corporate
  • an individual who has an interest of 50% or more in the corporation
  • beneficiary of a trust
  • related bodies corporate. (Section 19, BIF Act).

Registered owner of a lot means the person recorded in the freehold land register as the person entitled to the fee simple interest in the lot (Schedule 2, Land Titles Act 1994).

Will a charge over property work if the company goes in to liquidation/receivership? Will it be registered as a 1st or 2nd mortgage?

Placing a statutory charge on the respondent or a related entity’s property will create a security interest in favour of the claimant. Creditors who have a security interest possess stronger protections when an insolvency occurs.

The charge over property protections provide the claimant with the ability, once a charge is registered, to apply to a court to sell the property to satisfy the debt. It would be up to a court of competent jurisdiction to decide whether any other security interests existed over the property and their order of priority. As a general rule, priority between secured creditors is determined by the time of creation or registration of the security interest.

After the relevant property is sold, the claimant must give certain priority to the proceeds. This priority includes ensuring that sale costs are met prior to paying any other encumbrances such as other mortgages, charges over the property or caveats.

In case of insolvency, it is recommended that the head contractor obtain their own independent legal advice and discuss the matter with the appointed liquidator/receiver.

Certification changes

Additional inspections by certifiers - what if the certifier says they are not competent in the particular aspects of the work to which the additional inspection relates? Will they be required to inspect? They are not experts in all things so this may be the case in some circumstances.

As per existing practices, a certifier is able to obtain the help of a competent person to perform design/specification or inspection functions (Section 17, Building Regulation).

Even though a building certifier can rely on a certificate from a competent person when approving or inspecting building work, they are ultimately responsible for ensuring the building work complies.
It is an offence for a certifier not to perform the certifying function stated in the additional certification notice on or before the agreed day. However, the QBCC will not penalise certifiers in circumstances where the certifier has a reasonable excuse for not performing the additional certifying function by the agreed day.

Without limiting the QBCC’s discretion, a reasonable excuse may include unexpected incapacitation or unexpected delays in the work to be completed prior to the performance of the additional certifying function.

Are the standard forms for the renamed certificate of occupancy going to be available on 1 October 2020?

All Building Act forms will be made available on the Business QLD website: https://www.business.qld.gov.au/industries/building-property-development....