Why is it that a builder in a $4 million contract with a homeowner cannot use the Act to get paid, but the subcontracting electrician can?

Or why is it that a painter can use the Act to chase a $6,000 payment for painting a factory wall, but can’t use it to chase the $25,000 for painting a family home?

It’s because the Act always had an exclusion at s.7(2)(b) that excluded contracts between homeowners and contractors, where the work related to the home they lived in or intended to live in: owner occupiers.

This exclusion meant that unpaid work for owner occupiers could only chased in courts or in NCAT. As anyone who has been through either, neither option is particularly enticing; costly, lengthy, and not places where construction work is generally understood.

All that is about to change in New South Wales.

In the last amendments made to the Security of Payment Act that came into effect in October 2019, the s.7(2) exclusion was repealed and a matching exclusion was inserted into the Regulations. In September this year the NSW Government amended the Regulations such that from 1st March 2021, the exclusion will cease to apply!

This means that contractors in a payment dispute with owner occupiers will not be able to run a claim under the Act and have it adjudicated.

As owner occupiers are not a group familiar with the procedures of the Act, it will be required of the Department of Fair Trading to prepare and make available information material to advise owner occupiers of their obligations under the Act. It is likely that a payment claim served on an owner will need to have certain information attached.

This is the largest step forward for Security of Payment in its 20-year history in NSW, and yet it is not widely known, and the impact has not been understood. In my experience, the payment disputes that contractors are confronted with on residential homes are as vicious and unfair as those in the commercial sphere. The Act will do a lot to drive such disputes through a fast low-cost process to a determination. The most common problem for contractors is that they have nowhere to go. Owed large amounts, they don’t have the time or money to go through NCAT or Court. And there they stay, in payment limbo. Forever.

Meanwhile the owner moves in and enjoys the benefit of the work for nothing. We once had a builder who moved heaven and earth to get a new home completed by Christmas and the owners were so lovely until it was completed. Then they moved in and left him out of pocket for over $400,000.00.

And then they lawyered up.

This amendment to the Regulations will change all that. At time of writing almost no publicity has arisen around this issue and it is likely to go unrecognized for some time. But I don’t think it will be long before the pursuit of payment via the Act becomes the default for residential payment disputes.

And not a moment too soon. This is a great move and hopefully other states will follow.