Deposits and progress payments
July 31, 2019
The law in Tasmania imposes restrictions on builders receiving deposits and progress payments when they are carrying out residential building work. Failing to comply with these requirements is an offence punishable by a maximum court fine of 300 penalty units for an individual ($50,400) or 800 penalty units for a company ($134,400). Infringements notices with fines up to 20 penalty units ($3,360) may also be issued.
A builder may before commencing residential building work charge a deposit of up to 10% of the contract price if the contract price is less than $50,000. If the contract price is more than $50,000 then the deposit is limited to 5%. Despite this, it is possible to charge a deposit of up to 20% if more than half the value of the residential building work is done off-site. This exception can apply to kitchen, bathroom and laundry installations and installation of pre-fabrication work.
Once the deposit is collected, all progress payments must be “directly related to the progress of the performance at the building site of the residential building work”. In a residential building contract the percentages claimed for each stage must reflect the work that will be completed when the stage progress payment is sought. This prevents front loading and similar practices where the client is paying in advance for building work.
The definition of building site for the progress payment law expressly excludes a site where building work is done but will later be installed elsewhere. In plain English, this means that progress payment claims must relate to building work actually completed at the site. A practical consequence of the law is that builders cannot easily send progress payment claims to clients for supplies or other building work before there is actual building work on the site. Once the deposit has been paid it is not possible to seek pre-payments for building supplies and components.
If you have any questions about deposits and progress payments you can speak to a HIA workplace adviser on 1300 650 620.