HEAD CONTRACT Residential - Minor Works (Pad of 5 Contracts) For small residential projects. Especially suited to jobs under $20,000 which do not require Home Building Compensation Fund insurance. 52 Parramatta Road Forest Lodge NSW 2037 Private Bag 9 Broadway NSW 2007 T: (02) 8586 3555 enquiries@mbansw.asn.au www.mbansw.com.au Master Builders Association of NSW ABN 96 550 042 906
© Copyright - MASTER BUILDERS ASSOCIATION OF NSW - PLAIN ENGLISH MINOR WORKS CONTRACT - MARCH 2022 1 OWNER Name Address† Fax number† Email† Mobile Phone (h) (b) AND CONTRACTOR (must be the name of the licence holder as shown on the licence.) Name Address† Fax number† Licence No. (Current to: ........................................ / ........................................ / 20........................................ ) Email Mobile Phone (h) (b) Contract Price: $ All alterations to this contract must be initialled by the parties to verify the alteration. † this is the address, email or fax number to which notices are to be sent. A. WORK DETAILS Address of work site: What work is to be carried out? What materials are to be supplied by Owner? Answer the following questions to detail what is to be done by the Contractor, when and how it is to be paid for. Are there any quotes, plans and/or specifications which detail the work the Contractor will complete? If NO: ensure the work is sufficiently described above. If YES: they need to be attached to this document and signed by both parties. Tick to confirm ✔ Documents attached and signed by: Owner Contractor The work will be done in accordance with these details. Has any relevant approval been obtained? (Circle appropriate answer.) YES / NO / NOT REQUIRED B. TIME TO DO THE WORK Based upon the work to be done by the Contractor, as detailed above, how long will it take to complete? ................................................ Days/weeks from commencement. The work will commence on: (a) ........................................... / ........................................... / 20........................................... ; or within (b) 14 days of Contractor receiving complete approval terms; or (c) 14 days of the Owner providing written evidence of ability to pay the Contract Price; or (d) 14 days after the Contractor gets, if applicable, Home Warranty Insurance Cover. whichever is the later date of those applicable. C. STAGED PAYMENTS TO BE MADE BY OWNER amounts incl. GST @ 10% Category Amount Description of work Deposit* $ ................................................ Prior to work starting Payment 1 $ ................................................ ............................................................. Payment 2 $ ................................................ ............................................................. Payment 3 $ ................................................ ............................................................. Contract Price $________________ (including GST) WARNING:- the contract price may vary due to: (a) variations to the work – see clause 5; (b) inability to get materials or products; (c) effect of GST payable by the Owner. The Contractor’s variation margin is ................................................% (see clause 5) * A deposit cannot exceed 10%. The parties sign this contract on the date below to record their acceptance of the above details and the contract terms. Owner Contractor Dated: ........................................... / ........................................... / 20........................................... PLAIN ENGLISH MINOR WORKS CONTRACT For use in minor simple works, renovations, or repairs and or maintenance work. The time to do the work and how many payment claims should be considered when deciding to use this contract. Residential Building Work where the contract price is more than $20,000.00 at time of contracting will require Home Building Compensation Fund insurance.
© Copyright - MASTER BUILDERS ASSOCIATION OF NSW - PLAIN ENGLISH MINOR WORKS CONTRACT - MARCH 2022 2 STATUTORY OWNER’S CHECKLIST AND QUESTIONS 1 Have you checked that contractor holds a current contractor licence? Yes No 2 Does the licence cover the type of work included in the contract? Yes No 3 Is the name and number on the contractor’s licence the same as on the contract? Yes No 4 Is the work to be undertaken covered in the contract, drawings or specification? Yes No 5 Does the contract clearly state a contract price or contain a warning that the contract price is not known? Yes No 6 If the contract price may be varied, is there a warning and an explanation about how it may be varied? Yes No 7 Are you aware of the cooling-off provisions relating to the contract? Yes No 8 Is the deposit within the legal limit of 10%? Yes No 9 Does the contract include details of the progress payments payable under the contract? Yes No 10 Do you understand the procedure to make a variation to the contract? Yes No 11 Are you aware of who is to obtain any council or other approval for the work? Yes No 12 Do you understand that any registered certifier required to certify work under the contract is to be selected by you and the contractor cannot object to your selection? Yes No 13 Do you understand that you are not required to pay the contractor a deposit or any progress payments until the contractor has given you a certificate of insurance under Part 6 or Part 6B of the Home Building Act 1989 (except where the work is of a kind that does not require insurance)? Yes No 14 Does the contract include either of the following: (a) the cost of the insurance under Part 6 of the Home Building Act 1989, (b) the cost of the alternative indemnity product under Part 6B of the Home Building Act 1989? Yes No 15 Has the contractor given you a copy of the Consumer Building Guide, which provides key information about your rights and responsibilities under NSW’s home building laws and where to get more information? The Consumer Building Guide is included at the end of this Contract. Yes No 16 Does the contract include a statement about the circumstances in which the contract may be terminated? Yes No 17 Does the contract include the Security of Payment Guide which provides key information about your rights and responsibilities under the Building and Construction Industry Security of Payment Act 1999 and the Building and Construction Industry Security of Payment Regulation 2020? The Security of Payment Guide is included at the end of this Contract. Yes No The highlighted words above have been inserted by the Master Builders Association of New South Wales as an aide to the contract parties.
© Copyright - MASTER BUILDERS ASSOCIATION OF NSW - PLAIN ENGLISH MINOR WORKS CONTRACT - MARCH 2022 3 1. Signatures Do not sign the contract unless you have read and understand the clauses as well as the notes and explanations contained in the contract and this document. If you have answered “no” to any question in the checklist, you may not be ready to sign the contract. Both the contractor Builder and the Owner should retain an identical signed copy of the contract including the drawings, specifications and other attached documents. Make sure that you initial all attached documents and any amendments or deletions to the contract. 2. Signed copy of contract Under the Home Building Act 1989 a signed copy of the contract must be given to the Owner within 5 working days after the contract is entered into. 3. Insurance under Part 6 or Part 6B of the Home Building Act 1989 The contractor Builder must provide you with a certificate of insurance under the Home Building Compensation Fund before the contractor Builder commences work and before the contractor Builder can request or receive any payment. 4. Cooling off period for contracts with price over $20,000.00 Under the Home Building Act 1989 the Owner may, by notice in writing, rescind the contract in specific circumstances. The contract may be rescinded even if work has commenced under the contract. A notice of rescission can only be given to the contractor Builder if the contract price is over $20,000 and:- where the Owner has been given a copy of the signed contract – it is provided within five (5) clear business days after being given a copy of the signed contract; or where the Owner has not been given a copy of the signed contract within five (5) days after the contract was signed – it is provided within five (5) clear business days after the Owner becomes aware of being entitled to be given a copy of the signed contract. The notice of rescission must state that the Owner rescinds the contract, and must be given to the contractor Builder by leaving it at the address shown as the contractor Builder’s address. If the contract is rescinded during the cooling off period the contractor Builder may retain out of any money already paid the amount of any reasonable out of pocket expenses that the contractor Builder incurred before the rescission. The contractor Builder is entitled to be paid a reasonable price for any work carried out under the contract to the date the notice of rescission is given. 5. Acknowledgement of owners I/We have been given a copy of the Consumer Building Guide and I/we have read and understand it. I/We have completed the checklist and answered “Yes” to all items on it. Note. Where the Owner is a company or partnership or the contract is to be signed by an authorised agent of the Owner, the capacity of the person signing the contract, eg director, must be inserted. Signature Name [print] Capacity [print] Date Signature Name [print] Capacity [print] Date
© Copyright - MASTER BUILDERS ASSOCIATION OF NSW - PLAIN ENGLISH MINOR WORKS CONTRACT - MARCH 2022 4 GENERAL CONDITIONS OF CONTRACT 1. S tandard of work and materials plus Statutory Warranties for Residential Building Work The Contractor warrants that:- (a) the works will be done with due care and skill and in accordance with the description in the contract and the drawings and specifications listed, if any, in the contract particulars. Such documents, if any, form part of the contract. Refer to Part A on Page 1. Any material supplied by the Owner is to be fit for its intended purpose. The Contractor is entitled to rely on the Owner’s warranting the same. (b) all materials supplied by the Contractor will be good and suitable for the purpose for which they are used and, unless otherwise stated, will be new. (c) the work under the contract will result, to the extent of the work conducted, in a dwelling or facility that is reasonably fit for occupation or use; (d) the work will be done with due diligence and within the time stipulated in the contract or if no time is stipulated within a reasonable time. (e) any specific purpose for or outcome required as a result of the work is to be made known to the Contractor, in writing, and before the contract is signed. Such details are to be specifically attached to or detailed in the contract documents. If no specific purpose is made known then (c) above will be the outcome required; and (f) the work will comply with relevant laws. 2. Plans and specifications (a) (i) A ll plans and specifications for work to be done under this Contract, including any variations to those plans and specifications, are taken to form part of this Contract. (ii) A ny agreement to vary this Contract, or to vary the plans and specifications for work to be done under this Contract, must be in writing signed by or on behalf of each party to this Contract. (iii) This clause only applies to a contract to which section 7AA (Consumer information) of the Home Building Act 1989 applies. Quality of construction (b) (i) All work done under this Contract will comply with: (a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulation or other instrument made under that Act), and (b) all other relevant codes, standards and specifications that the work is required to comply with under any law, and (c) the conditions of any relevant development consent or complying development certificate. (ii) Despite Sub-Clause 2(b)(i), this Contract may limit the liability of the contractor Builder, and accordingly the Builder is not liable for a failure to comply with Sub-Clause 2(b)(i) if the failure relates solely to: (a) a design or specification prepared by or on behalf of the Owner (but not by or on behalf of the contractor Builder), or (b) a design or specification required by the Owner, if the contractor Builder has advised the Owner in writing that the design or specification contravenes SubClause 2(b)(i). 3. Payment by Owner The Owner must pay the Contract Price in the manner listed at Part C on page 1. The Contract Price includes GST at 10%. The GST is payable by the Owner provided the Contractor is GST registered and the Contractor provides a tax invoice to the Owner. The Contract Price covers those matters reasonably necessary for the completion of the work. The Owner must pay the balance of the contract price within two (2) working days of notice from the Contractor that the work is complete. If the parties wish to make smaller and more frequent claims for payment and payments, they are to attach to this document a written payment schedule detailing what amount is to be paid and when it is to be paid. The parties are to sign and date any such document. Late payments will incur interest at the rate of 15% per annum. 4. Completion of the work The period to do the work is noted at Part B on page 1. If no period is stated, then the work will be completed within a reasonable time after the Contractor commences the work. The Contractor is entitled to a reasonable extension of time when the work or the ability to work is affected by events or matters beyond the Contractor’s control. This includes delay in instructions or payment, inability to work due to weather (including the consequences of weather on things such as site access or safe working conditions) or an inability or delay in getting material or trades. The time for completion is to be adjusted accordingly. The Contractor will remove rubbish and surplus materials associated with the work upon reaching completion. The work will be complete when it is finished in accordance with the contract except for minor omissions and defects which do not prevent the works from being used for their intended purpose. The contract adopts as a reference document the Guide to Standards and Tolerances (the Guide) as produced by NSW Fair Trading. The Guide is to be used to resolve issues about work quality. 5. Variations to work The work may be changed by way of addition, omission or substitution. Such changes are to be agreed in writing between the parties or done as required by a competent Authority. The Owner and Contractor are to sign off on any variation. Each party will do what is necessary to record the variation details in writing. Additional Work The price to be paid or the allowance made for variations involving additional work should be agreed. If no agreement is reached the variation will be valued using the cost of material and labour plus in all cases, a reasonable margin, to the Contractor for administration, overhead and profit. The reasonable margin for this agreement is noted in Part C on page 1. If nothing is stated it will be 25%. Less Work If work is taken out of the contract then the reduction in the contract price will be an amount equal to the costs that the Contractor does not incur by reason of the work not being done. The proper effect of the GST is to be determined noting the value of work done as a variation.
© Copyright - MASTER BUILDERS ASSOCIATION OF NSW - PLAIN ENGLISH MINOR WORKS CONTRACT - MARCH 2022 5 6. H ome Building Compensation Fund Insurance - applicable only to residential building work The Contractor must provide the Owner with a Home Building Compensation Fund certificate of insurance before commencement of work and before demanding or receiving any payment. This requirement only applies if the work has a value of more than $20,000 and is residential building work under the Home Building Act 1989. 7. Insurance, loss, damage and injury The Contractor must insure against liability under the Workers’ Compensation Act and at common law in respect of persons employed by him and against liability for injury to third persons and in respect of damage to the property of third persons. The Contractor is to insure against loss and damage to the Works whilst the works are in progress. The Contractor is not liable for damage to or other impacts on the existing premises if the same arise as a normal result of undertaking the required work. The Owner must remove any furniture or personal goods from the vicinity of the work to minimise the risk of damage. If the Owner does not then all things left are at the Owner’s risk. The Owner is responsible for and indemnifies the Contractor against liability or claim in respect of damage to the existing premises or movable property left at the work site during the Works or in respect of injury to any person being in the premises by permission of the Owner provided that the Contractor is not guilty of default or negligence which causes the injury, loss, or damage. The Contractor will make good loss or damage to the work or property of the Owner caused by the Contractor or the Contractor’s employees, agents or subcontractors. Please note the exception set out in the paragraph above. 8. Ability to suspend/terminate work (a) The Owner is in default if the Owner interferes with and/or prevents the Contractor from carrying out the work or fails to make a payment as required. In such circumstances the Contractor may suspend work until the default is rectified. The completion date for the work will be extended by the same number of days as the work is or was so suspended. (b) If the Owner does not correct the default within ten (10) business days of receiving a written request to remedy the default, then the Contractor may by a further written notice terminate this contract and the Owner will be liable to the Contractor for any money due to and any loss suffered by the Contractor. (c) The Owner may terminate this Contract in the circumstances provided by the general law however this does not prevent the Owner and Builder from agreeing to additional circumstances in which the Contract may be terminated. 9. Dispute Resolution If any dispute or difference (“dispute”) concerning this Agreement arises between the Owner and the Contractor then the party claiming there is a dispute is to give the other written notice of the dispute. Within five (5) business days after the giving of the notice of dispute the parties must meet at least once to attempt to resolve the dispute or to agree on a method of resolving the dispute by means such as independent review and report, mediation, expert determination or arbitration. At any such conference each party must be represented by someone having authority to settle the matter. The parties agree and understand that relative to the nature and type of dispute, formal and legal dispute resolution procedures can be very expensive — for all parties. Accordingly, they agree to act cooperatively and reasonably at all times. Where applicable they will use the Guide to resolve disputes. 10. Selection of Registered Certifier (a) The Builder will notify the Owner if a registered certifier is required with respect to particular work done under this contract. (b) T he selection of a registered certifier is the sole responsibility of the Owner (subject to section 6.6(4A) or 6.12(4A) of the Environmental Planning and Assessment Act 1979).
Important: this is a summary document only. 1 None are currently prescribed by the Regulation This is the form of information about the role of a registered certifier, approved by the Secretary for the holder of a contractor licence to give to the other party to a contract. It is an offence under section 11B of the Home Building Act 1989 if the licence holder does not provide this document to the other party before entering into a contract. This requirement applies to a contract under which the licence holder undertakes: ■ to do, in person, or by others, any residential building work or any specialist work, or ■ to vary any such undertaking to do residential building work or any specialist work or the way in which any such work is to be done, but only if a registered certifier will be required with respect to some/all of the work. This requirement does not apply to: ■ a contract to do residential building work entered into between the holder of a contractor licence and a developer with respect to the work, ■ a contract for which the contract price does not exceed $5,000 or (if the contract price is not known) the reasonable market cost of the labour and materials involved does not exceed $5,000, ■ a contract of a class prescribed by the Home Building Regulation 20141. A registered certifier is a public official, independent of the contractor Registered certifiers are public officials who do not work for builders, contractors, developers or property owners. A certifier can be from the private sector or your local council. A certifier’s role is to make an independent assessment to determine if relevant requirements of the Environmental Planning and Assessment Act 1979 have been met to warrant the issuing of a construction certificate, complying development certificate or occupation certificate. Certifiers do not supervise or manage builders, contractors or building sites. What are a certifier’s responsibilities at each stage? Before construction starts, a certifier’s responsibilities include to: ■ check whether the proposed work will meet legislative requirements if built in accordance with the approved plans and specifications ■ advise which inspections will be mandatory as the work progresses ■ notify the council of their appointment as the principal certifier ■ check your builder or contractor is licensed and insured under the Home Building Act 1989 ■ check whether any applicable conditions of your consent or approval are met ■ check whether any applicable fees are paid, such as the long service levy ■ install a sign on the building site, showing the certifier’s details ■ inspect the building site (if required). During construction, a certifier’s responsibilities include to: ■ inspect the work in person, at each required stage ■ if a non-compliance is identified, issue a direction to you and/or the builder requiring certain action to be taken, and notify the council if the required action isn’t taken ■ respond appropriately to any complaints about the development, including informing the council if needed. After construction is finished, a certifier may issue an occupation certificate if: ■ all relevant conditions of your consent are met, and you have applied for the occupation certificate, and ■ all inspections have been carried out and the work is found to be satisfactory, unless an inspection (other than the final inspection) was missed under circumstances deemed unavoidable by the certifier (and evidence of suitability of the work is provided), and ■ the work is ‘suitable for occupation’ in accordance with the Building Code of Australia. Important: this is a minimum standard of compliance that must be met. It does not guarantee that all the work has been completed. For example, a house or apartment may be suitable for occupation while painting or landscaping is still being completed. An occupation certificate does not certify that the conditions of your contract with the builder have been met. The contract with your builder is a different contract to the contract with your certifier and must be considered separately. Your obligations Appoint and enter into a contract with your chosen certifier. The choice and appointment of a certifier is yours – your builder may recommend a certifier but cannot appoint the certifier for you, cannot offer to change the contract price, and cannot refuse to carry out work if a particular certifier is not appointed. You must communicate with your builder, who will notify the certifier of each stage of work so the certifier can inspect it. If an inspection is missed, the certifier may have to refuse to issue an occupation certificate. You can request that the certifier and builder copy you into all correspondence between them. Finding more information on certifiers Details of the class of registration each certifier holds, their period of registration, professional indemnity insurance and disciplinary history can be found at www.fairtrading.nsw.gov.au: ■ Details of registered certifiers (or search ‘appointing a certifier’ from the homepage) ■ Disciplinary actions against certifiers (or search ‘certifier disciplinary register’ from the homepage). Questions? The Fair Trading website www.fairtrading.nsw.gov.au has information about certifiers, enforcement powers, how to replace a certifier and resolving concerns about a certifier: ■ Search ‘what certifiers do’ for information about a certifier’s role and responsibilities. ■ Search ‘concerns with development’ for information about enforcement powers of certifiers, councils and Fair Trading, and how to resolve concerns about a certifier. PO Box 972 Parramatta NSW 2124 Tel: 02 9895 0111 TTY: 1300 723 404 ABN 81 913 830 179 www.fairtrading.nsw.gov.au © State of New South Wales through Department of Customer Service 2020. Role of registered certifiers – Home Building Act 1989 Information about registered certifiers – Home Building Act 1989 – June 2020
The Security of Payment laws In NSW, people who carry out construction work or supply related goods and services under a construction contract are entitled to receive progress payments for the work or supply of those goods and services. This is regulated by the Building and Construction Industry Security of Payment Act 1999 (NSW) and Building and Construction Industry Security of Payment Regulation 2020 (NSW) (“Security of Payment laws”). The Security of Payment laws are relevant to those involved in contracts within the building and construction industry such as builders, tradies, subcontractors, consultants and suppliers. The purpose of the Security of Payment laws is to reduce the risk of insolvency in the building and construction industry in NSW by ensuring members of the contractual chain are paid for the work or services they provide. What do the Security of Payment laws apply to? ✓Any construction contract. ✓A construction contract that is written or oral. ✓A construction contract that is partly written and partly oral. ✓A construction contract that says it is to be governed by a law of a State or Territory outside of NSW but the work is carried out in NSW. ✓On and from 1 March 2021, owner occupier construction contracts. What are owner occupier construction contracts? Owner occupier construction contracts are construction contracts for residential building work on any premises or part of the premises where the contracting party resides or proposes to reside in. For example, an home owner engaging a builder to build their home. What’s not covered under Security of Payment laws? ✗ A construction contract where the work is performed outside of NSW. ✗ A construction contract for goods and services supplied in respect of construction work outside of NSW. ✗ A construction contract that regulates an employer/employee relationship. ✗ A construction contract that relates to a financial loan. What is a progress payment? A progress payment includes: ■ The final payment for construction work carried out or the supply of the goods/ services under the construction contract, or ■ A single or one-off payment for carrying out construction work or the supply of goods/ services under the construction contract, or ■ A payment based on an event or date (“milestone payment”). This does not prevent the building contractor making one payment claim for a progress payment in any particular month for construction work carried out or for related goods and services supplied in that month. How is a progress payment amount determined? The progress payment amount is usually set out in the construction contract. If the progress payment amount is not set out in the construction contract, the amount will be calculated based on the value of the construction work undertaken or the goods/service provided. When is a progress payment due for payment? A progress payment should be made in accordance with the terms of the applicable construction contract. Due date for payment A person entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. There are specific maximum deadlines for payment depending on the nature of the contract. If the construction contract under which the payment claim is made is not an owner occupier construction contract as defined by the Act, the following will apply: Where a head contractor makes a payment claim to a principal, the payment claim becomes due and payable by the principal: ■ 15 business days after the payment claim is served on the principal, or ■ an earlier date if the construction contract between the principal and head contractor specifies this. A progress payment to be made to a subcontractor becomes due and payable: ■ 20 business days after the payment claim is served on the head contractor, or ■ an earlier date if the construction contract between the parties specifies this. Where a party to an owner occupier construction contract makes a payment claim, the claim becomes due and payable: ■ in accordance with the terms of the contract, or ■ if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is served on the person liable to make the payment. Procedure for recovering progress payments ✓A claimant can serve one payment claim in any month under each contract (can be on last day of one month and first day of next month) or on or from an earlier date if the contract provides this. ✓If the construction contract has been terminated, a payment claim can be made from the date of termination. ✓A payment claim must identify the goods or services the claim relates to, the claimed amount, and clearly state it is a payment claim made under the Security of Payment laws. ✓A claimant can only make a claim within the period determined in the contract or 12 months after the work was carried out (whichever is later). ✓A head contractor claimant must fill out and attach a supporting statement form to their claim. Replying to a payment claim: payment schedules A party who has been served a payment claim (“the respondent”), may reply by providing a payment schedule to the claimant. There are strict timeframes for a respondent to provide a payment schedule to a claimant. These are: ■ within the time outlined in the construction contract, or ■ within 10 business days after the payment claim is served (whichever is earlier). If a respondent does not provide a payment schedule to the claimant within the timeframe required, they are liable to pay the amount requested by the claimant in the payment claim. A payment schedule must identify: ■ the payment claim it is for ■ the amount of payment (if any) that will be paid (the “scheduled amount”) ■ if the scheduled amount is less than the claimed amount, why the scheduled amount is less ■ if it is less because the respondent is withholding payment for any reason, the respondent’s reasons for withholding payment. Important facts ■ Interest is payable on the unpaid amount of a progress payment that has become due and payable. ■ If a progress payment is due and payable, a claimant can exercise a legal right (called a lien) to legally possess Fair Trading Security of Payment Guide | February 2021 Security of Payment Guide Understanding progress payments in the building and construction industry
any unfixed plant or materials they have supplied to the respondent, until the progress payment is paid. What if a progress payment is not paid? If the claimant has made a payment claim, and the respondent does not accept the payment claim, a claimant can apply to have the matter dealt with by an adjudicator or a court. A claimant can make a claim in court or make an application for the matter to be heard by an adjudicator, if: ■ the respondent does not provide a payment schedule, or ■ the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or ■ the respondent does not pay the claimant in accordance with the payment schedule. A claimant can serve a payment withholding request on a principal contractor to retain sufficient money to cover the claim out of money that is, or becomes payable by the principal contractor to the respondent. Adjudication A claimant may apply for adjudication of a payment claim where the respondent provides a payment schedule but: ■ the scheduled amount indicated in the payment schedule is less than the claimed amount, or ■ the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount. The claimant may also apply for adjudication of a payment claim if the respondent fails to provide a payment schedule at all to the claimant and also fails to pay the whole or any part of the claimed amount by the due date for payment of the amount. Information relating to the adjudication of payment claims is outlined in Division 2, Part 3 of the Act. Key points: Adjudication ■ The Security of Payment laws provide rules relating to an adjudication application, such as the number of days an application must be made within. For more details see section 17 of the Act. ■ A claimant may withdraw an adjudication application at any time before an adjudicator has been appointed or before the application is determined. ■ Authorised nominating authorities (organisations authorised by the Minister) refer adjudication applications to an eligible adjudicator. The eligibility criteria for adjudicators is detailed in clause 19 of the Regulation. Trust account requirements If a head contractor has a construction contract with a principal that has a value of at least $20 million, the head contractor has an obligation to: ✓Hold retention money in trust for the subcontractors entitled to the money. ✓Ensure that the money is paid into and retained in a trust account established with an authorised deposit-taking institution (ADI) approved under section 87 of the Property and Stock Agents Act 2002. ✓Ensure the retention money is paid into the trust account no later than 5 business days after the head contractor is required to retain the retention money. What is retention money? Retention money means money that is retained by a head contractor out of money that the head contractor is required to pay to a subcontractor under a construction contract as security for the performance of obligations of the subcontractor under the contract. For example, 5% of the contract’s value may be held as the retention money, or there could be an arrangement where there will be a 10% deduction from each of the subcontractor’s progress payments which is kept as the retention money component. Each construction contract may contain different terms and can be negotiated. Establishing a trust account When establishing a trust account for retention money, there are certain requirements, such as notifying the Secretary of the account’s details and notifying the ADI that it is an account opened for the purposes of the Security of Payment laws. For more information on the requirements when opening a trust account see clause 9 of the Regulation. Withdrawals from a trust account A head contractor must not withdraw retention money from a retention money trust account except for 1 of these 4 reasons: ✓Payment of money in accordance with the terms of the construction contract under which the money was retained by the head contractor. ✓If the head contractor and subcontractor make an agreement in writing. ✓To pay an amount that an adjudicator has determined the respondent must pay to the claimant. ✓In accordance with an order of a court or tribunal. ✗ It cannot be used by the head contractor to pay their own debts. Record keeping A head contractor must keep records in the form of a ledger to keep track of things such as the amounts deposited into or withdrawn from the account. The ledger is to be provided to the subcontractor at least once every 3 months, or as often as may be agreed in writing by the head contractor and the subcontractor (but at least once every 6 months). Definitions: key terms Principal means the person for whom construction work is to be carried out or related goods and services supplied under a construction contract (the main contract) and who is not themselves engaged under a construction contract to carry out construction work or supply related goods and services as part of or incidental to the work or goods and services carried out or supplied under the main contract. Head contractor means the person who is to carry out construction work or supply related goods and services for the principal under a construction contract (the main contract) and for whom construction work is to be carried out or related goods and services supplied under a construction contract as part of or incidental to the work or goods and services carried out or supplied under the main contract. Note—There is no head contractor when the principal contracts directly with subcontractors. Subcontractor means a person who is to carry out construction work or supply related goods and services under a construction contract otherwise than as head contractor. Claimant means a person by whom a payment claim is served. Respondent means a person on whom a payment claim is served. This fact sheet must not be relied on as legal advice. For more information about this topic, refer to the appropriate legislation. © State of New South Wales (NSW Fair Trading). See NSW Fair Trading’s copyright policy at fairtrading.nsw.gov.au or email publications@finance.nsw.gov.au Approved form under: Home Building Regulation 2014 (clause 8) Fair Trading Security of Payment Guide | February 2021 fairtrading.nsw.gov.au 13 32 20 More information Visit fairtrading.nsw.gov and search for “security of payment or email securityofpayment@custom-erservice.nsw.gov.au For further help call 13 32 20. If you’re deaf, hard of hearing, or speech-impaired, contact us through the National Relay Service. If you speak a language other than English, call our Telephone Interpreter Service on 13 14 50.
NSW Fair Trading – Fact Sheet July 2020 Tel: 13 32 20 fairtrading.nsw.gov.au Consumer Building Guide Mandatory information for consumers Builders and tradespeople must give you a copy of this guide before entering into a contract for residential building work that costs more than $5,000. Read this guide to help protect your rights, carry out your responsibilities and support your building project. Protecting consumers under home building laws NSW Fair Trading is the NSW Government agency regulating residential building work (including building or trade work on single dwellings, villas, houses and home units) under the Home Building Act 1989. What to consider before work starts Licensing Licensing requirements include: • tradespeople and builders carrying out residential building work valued at more than $5,000 must be licensed by NSW Fair Trading (check a licence on the Fair Trading website or by calling 13 32 20) • regardless of the work’s cost, a licence is always required for specialist work (like plumbing, air conditioning and refrigeration, electrical work and gasfitting) • if the work requires more than one tradesperson, you need a builder to manage the building project and co-ordinate the tradespeople, such as plumbers, painters and carpenters. Home Building Compensation Scheme The State Insurance Regulatory Authority (SIRA) regulates home building compensation (HBC) cover in NSW. HBC cover is required where work is worth more than $20,000 (including labour and materials). The builder or tradesperson must give you evidence of HBC cover before they start work on your project or you pay them any money, including a deposit. For more information or to check the validity of your cover, visit sira.nsw.gov.au or call 13 10 50. Approvals To help your building project go smoothly: • check with your local council or an accredited private certifier on approvals your building work needs • engage a building certifier. This is your responsibility, not the builder’s. Contracts and payments All contracts must be in writing. The two main contract types are: • fixed price or lump sum - where the builder or tradesperson agrees upfront to a fixed amount for the whole job. Unforeseen changes during construction may affect the final cost • cost plus contract - there is no guaranteed final cost for the job (often this contract is used where the project’s nature prevents the final cost from being calculated). The consumer repays the builder for verified direct and indirect costs and fees at regular intervals. It is good practice for the builder to give a non-binding estimate before starting, and track costs with you against the project’s budgeted estimate. Residential building work worth less than $20,000 must be done under a ‘small jobs’ contract. The written contract must be dated and signed by, or on behalf of, each party. It may specify that work be paid for at regular intervals. It must contain: • the parties’ names, including the name of the holder of the contractor licence as shown on the contractor licence • the number of the contractor licence • a description of the work • any plans or specifications for the work, and • the contract price, if known. Residential building contracts and contracts for specialist work valued at more than $5,000, which require a certifier, must (unless you are a developer) include terms about your freedom to choose your own certifier. The contractor must also give you prescribed information about certifiers, published by Fair Trading, before entering into a contract. It is an offence for a contractor to unduly influence your choice of a certifier or object to your choice. Examples of undue influence include: • making it a requirement of the contract that a specified certifier or class of certifier is or isn’t appointed • offering to change the contract price if a specified certifier or class of certifier is or isn’t appointed • refusing to carry out work under the contract if a specified certifier or class of certifier is or isn’t appointed.
NSW Fair Trading – Fact Sheet July 2020 Tel: 13 32 20 fairtrading.nsw.gov.au Residential building contracts regarding work worth more than $20,000 requires a full home building contract. As well as all of the requirements of the ‘small jobs’ contract, it must include other comprehensive information such as the details of the statutory warranties the builder must provide, the cost of any applicable HBC cover and the contract price or warning that the contract price is not known. The contract must also include a checklist prescribed by Fair Trading. Find a complete list of contract requirements on our website. All contracts over $20,000 in value must have a progress payment schedule. Progress payments must match the work carried out and, for cost plus contracts, be supported by receipts or other verifying documents. Any change you need to make to a contract is a ‘variation’. Variations must be in writing and be signed by both parties to the contract. Almost all will impact the contract price. The maximum deposit you can be asked to pay before work starts is 10%. Common traps and tricks Beware of: • an extremely low quote compared with others. This may indicate the job’s quality is being compromised, or that the builder may not fully understand what is required • ‘sales pitches’ putting pressure on you to sign a contract quickly to avoid a price increase • a builder who recommends you get an owner-builder permit while they organise all the building work. The builder may be trying to avoid responsibility and may not have the right kind of licence or HBC cover. When things go wrong Statutory warranties Builders and tradespeople must guarantee that their work is fit-for-purpose, performed diligently and delivered in a reasonable timeframe, in line with the contract. Unless otherwise specified, materials should be new and appropriately used. These warranties are time-limited: legal proceedings to enforce them must be commenced within 6 years for major defects and 2 years for all other defects. There is another 6 months for both warranty periods if the defect only became apparent after 18 months or 5 and a half years. Find out more about these warranties on the Fair Trading website. Resolving a dispute with your builder or tradesperson These steps can help you resolve a dispute: • you must notify your builder or tradesperson and discuss concerns as soon as you become aware of a problem. Follow up with an email or letter • understand acceptable work standards by downloading the Guide to Standards and Tolerances from our website • contact Fair Trading for free dispute resolution if you and your builder or tradesperson are unable to resolve the dispute • lodge a claim with the NSW Civil and Administrative Tribunal (NCAT) if you remain unsatisfied with the dispute resolution outcome • protect your rights under the HBC Scheme: contact your insurer or provider as soon as you become aware of defective or incomplete work. Home building compensation disputes For help resolving disputes with a HBC insurer or provider, visit the SIRA website sira.nsw.gov.au or call 13 10 50. More information Visit the Fair Trading website to: • learn more on your rights and responsibilities and the statutory warranties • do an online licence check to verify a builder or tradesperson´s licence details • find out about dispute resolution • download free home building contracts • subscribe to enews. www.fairtrading.nsw.gov.au Fair Trading enquiries 13 32 20 TTY 1300 723 404 Language assistance 13 14 50 © State of New South Wales through NSW Fair Trading We encourage the reuse of this information under the Creative Commons Attribution 4.0 licence. See NSW Fair Trading’s copyright policy at www.fairtrading.nsw.gov.au or email publications@finance.nsw.gov.au This fact sheet must not be relied on as legal advice. For more information about this topic, refer to the appropriate legislation.
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