In 2024, legislation governing the building and construction industry experienced several amendments, one of which entirely changed the way many builders could claim progress payments for works completed at a project.
The Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) (Act) ensures any person who undertakes to carry out construction work, or supply related goods and services, are entitled to receive (or recover) progress payments. However, the same Act now limits a persons’ entitlements to progress payments.
Section 8 of the SOPA was amended in August 2024, restricting builders’ entitlements to progress payments if they are unlicensed and/or uninsured in accordance with the Home Building Act 1989 (NSW) (HBA). Although this reform was passed to limit building works from being carried out unlawfully, it now requires builders to retain the appropriate licenses and insurance in order to be entitled to a progress payment.
Section 8 of the SOPA now entails the following:
(1) A person who, under a construction contract, has undertaken to carry out construction work or to supply related goods and services is entitled to receive a progress payment.
(2) A person is not entitled to a progress payment under subsection (1) if the construction contract—
(a) does not comply with the Home Building Act 1989, section 4, or
(b) involves construction work that is residential building work done in contravention of the Home Building Act 1989, section 92.
(Section 4 of the HBA relates to unlicensed contracting, and Section 92 of the HBA relates to the requirement of a policy of insurance under the Home Building Compensation Fund)
Unfortunately for many contractors, this amendment applies retrospectively – meaning this amendment applies even if you entered into a contract, and completed the works whilst being uninsured and/or unlicensed prior to August 2024.
How can an uninsured/unlicensed contractor claim unpaid monies?
If you find yourself in the predicament of being uninsured or unlicensed, however have completed works at a project for which you are owed monies, a possible route could be to pursue a claim on a Quantum Meruit (QM) basis under section 94 of the HBA. Pursuing a claim on a QM basis allows the contractor to prove that the contract was once a valid agreement, even without an insurance or license. Accordingly, the work completed by the contractor would be reasonably assessed. This claim must be brought through litigation before the court or NCAT.