BODY CORPORATES TAKE CARE – ITS NOT JUST AN INVOICE ANYMORE
We acknowledge that construction can be quite a dull area (although our construction lawyers Paul and Emma might not agree) so we will try to explain the changes as briefly as we can.
On 17 December 2018, the Building Industry Fairness (Security of Payments) Act 2017 (“BIF Act”) took over the job of regulating claims for payment for carrying out construction work or supplying related goods and services in Queensland.
These changes apply to not only builders, subcontractors and suppliers but also to most consumers including bodies corporate having work carried out on common property (or within a Lot).
Put simply, the BIF Act says a contractor is entitled to payment if that contractor has carried out ‘construction work’ or ‘supplied related goods or services’ under a ‘construction contract’. The term, ‘construction contract’ is defined to include nearly all agreements where a contractor undertakes to carry out construction work or supply related goods or services. The definitions of construction work and related goods and services in the BIF Act are also very broad.
- “Construction work” includes:
- Construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures;
- The installation of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems;
- The external or internal cleaning of buildings carried out in the course of construction, alteration, repair, restoration, maintenance or extension; and
- Painting or decorating of the internal or external surfaces of any building.
- “Related goods and services” means:
- Goods of the following kind:
- Materials and components to form part of any building, structure or work arising from construction work; or
- Plant or materials (including sale and hire) for use in the carrying out of construction work.
- Goods of the following kind:
- Services of the following kind:
- The provision of labour to carry out construction work;
- Architectural design, surveying or quantity surveying services related to construction work; or
- Building, engineering, interior or exterior decoration or landscape advisory services relating to construction work.
So why is this important to a body corporate
Bodies corporate have an obligation to maintain common property and that maintenance can involve plumbing, electrical and data, painting, fencing, carpentry, waterproofing and glazing, just to name a few. In doing so, a body corporate will usually engage a contractor and of course, you would expect the body corporate to receive an invoice once the work is done.
The BIF Act sets up a process for contractor’s to claim progress payments for the construction work carried out or related goods or services supplied. It establishes time frames for when those progress claims can be claimed by the contractor and must be paid by the consumer (ie the Body Corporate).
That might not seem something to be concerned about but, what happens if you are not happy with the job the contractor has done or the amount the contractor is charging for the work? That is where it becomes a problem because that invoice the body corporate receives from the contractor can have serious consequences for the body corporate.
What you really need to know
If the body corporate receives (and that includes being received by the body corporate manager) anything that remotely resembles an invoice claiming payment for construction work or related goods and services, the committee must respond to it with a ‘payment schedule’ within 15 business days.
A payment schedule is a document responding to the payment claim that identifies:
- the payment claim (the invoice);
- states the amount of the payment, if any, that you propose to make; and
- if that amount is less than the amount claimed, states the reasons why the amount is less.
If you do not pay the amount in full or do not dispute the progress claim by giving a payment schedule within 15 business days, not only will the whole amount be owing as a debt that can be pursued against the body corporate in a court or through an adjudication application, you may also be fined by the Queensland Building and Construction Commission under section 76(1) of the BIF Act.
The only time you are not required to give a payment schedule is if you pay the amount claimed in full on or before the due date.
It is not altogether unusual for contractors to claim payment for more than they may be entitled to or carry out work that may be defective. In those circumstances, a committee will need to move quickly to make sure the body corporate is not left exposed and compelled to make payment of amounts that exceed what the committee believes the body corporate should be liable for.
If the body corporate receives an invoice from a contractor for construction work or related goods and services, that the committee is not happy with, it should move swiftly and seek urgent advice as to its rights and remedies.
As always, if in doubt, please call us. Active Law’s construction law team specialise in this area and can assist you in ensuring you are equipped and ready for the changes the BIF Act brings with it. We can assist in updating your procedures or preparing your payment schedules or adjudication responses.
Active Law’s construction team are very experienced in all aspects of construction law including in the drafting, negotiation and administration of contracts, dispute resolution including litigation, arbitration and of course the procedures under security of payment legislation including the BIF Act. Active Law’s Paul Hick has been involved in the construction industry for over 35 years and is a senior adjudicator under security of payment legislation in QLD, NSW, ACT and SA. Formerly employed by the QBCC, Emma Ward brings with her unique insight into Queensland’s construction watchdog and is well placed to assist you with any concerns you have with contractors, construction contracts or disputes over defective building work. Don’t wait until it’s too late. Call Paul & Emma today.
Disclaimer: Reliance on content.
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.