Site shutdown - dealing with clients & contracts

Where work has commenced on a residential building site, the builder is responsible for the ongoing protection and safety management of the site and all building works during a mandatory shut down period. 

There are a range of matters beyond the building site that members will also need to manage in relation to the client, any employees, insurance and finance. This information sheet outlines matters to assist you in understanding what these issues are and the best way to deal with a very complex situation. 

Talk to your client 

As soon as possible you should contact your client/s to advise them of the following:

• That work on-site will stop
  • In accordance with the Government’s mandatory shutdown all residential building work must cease until 30 July.
  • That the site will be made safe and secure
  • Where necessary you will inspect the site to make it safe and secure.
  You will be carrying out regular inspections of the property to ensure the site remains safe and secure. HIA recommends inspecting sites every 3 days.
• That subcontractors including suppliers will be contacted to advise them that work must cease.
• That you will be seeking an extension of time to the building period under the contract
  • Given the Government has applied a mandatory shutdown the period of the extension of time will be until at least 31 July. 
  • HIA recommends that you consider whether additional time will be required as this stoppage of work may have flow on effects for the scheduling of work into the future.
  • Once the Government’s mandatory shutdown has been lifted you will contact them to re-commence works in a timely and orderly way. 
• That you will stay in contact with them as appropriate through the shutdown period.

Talk to your trade contractors & suppliers

Advise any subcontactors including suppliers that all sites will be closed and work is unable to continue due to the shutdown.

Manage your employees 

Due to the Government mandated shutdown you should talk to your employees as soon as possible to advise them that the site will be closed and they are not to attend work.

You can stand down your employees, without pay, during the shutdown period.

An employee can be stood down without pay if they cannot do useful work in limited circumstances such as a stoppage of work for which you can’t be held responsible. 

An enforceable government direction preventing work on construction sites continuing is considered a stoppage of work. Therefore your employees are not required to come to site and you are not required to pay your employees during the shutdown.

Your employee/s may be entitled to Government financial assistance, such as the COVID-19 Disaster Payment, during this time.

The COVID-19 Disaster Payment provides:

• A payment of $375 per week when an employee loses up to 20 hours of work per week.
• A payment of $600 per week when an employee loses 20 hours or more of work per week. 

Your employee/s will need to apply through Services Australia for the payment.

Alternatively your employee/s may take paid annual leave or long service leave during this time. An employee cannot take paid sick leave or compassionate leave.

HIA has other useful resources to help members understand more about managing employees during COVID-19. 

Can I change or scale down my business operations in response to COVID-19

COVID-19 and employee leave

Is COVID-19 impacting your workplace?

Manage deliveries

If you had deliveries of materials scheduled during the shutdown period, these can still be received under the urgent work provisions:

• Contact your suppliers regarding deliveries that have been ordered but not yet delivered to site to determine if the supplier wishes to still deliver during the shutdown.
• Discuss putting a hold on any deliveries scheduled to arrive during the shutdown that can not be stored safely or securely or would deteriorate if left unprotected on the site. 

Consider your contract 

This mandatory shutdown means the completion of the building works will be delayed by at least two weeks. 

HIA contracts allow builders to seek an extension of time when the building works are delayed:  

• by something beyond the builder’s sole control, and
• due to something that was not reasonably foreseeable at the time you entered into the contract.

This Government mandated shutdown of the construction industry is a valid reason to claim an extension of time.

To claim an extension of time you must:

• Provide the owner with a written notice for an extension of time detailing:
  • The cause of the delay; and
  • The extension of time. 
• Ensure that the notice is provided within 10 working days of when you became aware of both the cause and the extent of the delay.

This means you should seek an extension of time for at least the shutdown period as soon as possible. 

If you do not claim the extension of time in accordance with the contract, you may be unable to rely on it at a later time in the project.

To support the industry HIA has developed further information on dealing with delays.

Check your insurances

You will have a range of insurances applicable to each of your residential building projects. 

Public liability and contracts works insurance – you should check the following:

• Will they continue to operate during the shutdown period? 
• If they do, what is the period of operation of your public liability and contract works insurance?
• Can you extend the period of cover of these insurances?

Insurance under the Home Building Compensation Fund

• Will this continue to apply during the shutdown period? 
• If necessary can you extend the application of your warranty insurance?

Consider possible financial implications

The client should consider contacting their financial institution regarding: 

• Any fees or penalties that may be incurred as a result of construction being delayed?
• Any risks regarding the ongoing availability of finance? 
• Options to put any finance on hold should that be necessary.

You should consider contacting your business financial institutions regarding:

• Financing options should this disruption delay any expected milestone payments. 
• A line of credit or other financial options that may help relieve pressures associated with the stoppage of construction work due to the shutdown.
• Options for relief from the payment of any rent, repayments of loans or lines of credit.

Further information

HIA’s Member Alert from 18 July 2021 provides details regarding the restrictions that apply during the shutdown period.

HIA’s Site Shutdown checklist provides additional information that may assist members on how they should manage closing a home building or renovation site in accordance with the direction to stop work on construction sites.