Owner occupier construction contract exemption to be removed from Building and Construction Industry Security of Payment Regulation 2020 (NSW)

01 March 2021

Amendment to the Building and Construction Industry Security of Payment Regulation 2020 (NSW)

From 1 March 2021, Schedule 2 of the Building and Construction Industry Security of Payment Regulation 2020 (NSW) (Regulation) will commence. The introduction of the additional Schedule follows the recent commencement of the Regulation on 1 September 2020, which further expands the operation of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) in the residential building sector.

Schedule 2 omits the current clause 4 definition of exempt residential construction contract from the Regulation. The amendment will operate to remove owner occupier construction contracts (i.e. where the homeowner resides or intends to reside at the premises) as a prescribed class of contract to which the Act does not apply. In other words the Act will now apply to Owner occupied single dwellings, where previously it did not apply to this type of construction contract. The amendment will only relate to residential building contracts entered into on and from 1 March 2021.

The implications of the omission of clause 4 are significant for both residential builders and owner occupiers, as builders are now entitled to utilise the statutory payment mechanisms under the Act against the homeowner. Accordingly, it is advisable for both parties to a residential building contract to familiarise themselves with the relevant payment claim and payment schedule provisions in the Act, particularly the strict timeframes in which to serve and respond to payment claims. Parties may also wish to review their contracts to ensure consistency with the security of payment regime in NSW

If you require any further information in relation to your rights and liabilities under the Act or you would like to arrange a time to for us to explain the reforms to you and/or your team, please do not hesitate to contact David Vaughan. His contact details are set out below.

This article was written by David Vaughan, Partner and Lily O’Keefe, Law Graduate.

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