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Getting paid under Security of Payment (SOPA) laws starts with the right licence and insurance
Recent changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) have aligned the right to be paid and claim progress payments with Home Building Act 1989 (NSW) (HBA) requirements.
What are the changes?
To claim a progress payment under SOPA laws for construction work that is residential building work, the person (be it an individual or business) who makes a payment claim must:
- Hold the appropriate contractor licence for the type of work carried out; and
- Where the work requires home building compensation insurance (often referred to as home warranty insurance, or HBCF), that insurance is in place before the works commence, and before any money is received.
Previously, SOPA did not align with the above requirements. This created a loophole whereby a payment claim could be made, even if there was non-compliance with HBA requirements relating to licensing and insurance. This means that builders could sometimes succeed in recovering payments under SOPA even if they had not held a licence or obtained insurance as required under the HBA.
Refresher on your obligations
- Licensing: For all residential building work in NSW, a valid contractor licence is required for the relevant work. This applies to principal contractors and subcontractors down the line. Both individuals and entities (operating as a partnership or company) require a contractor licence.
- HBCF Insurance: Where the residential building work performed for a homeowner is valued at more than $20,000, it is a requirement to arrange the insurance before works commence, and before any money (including a deposit) is taken. The certificate of insurance must also be provided to the homeowner.
Failure to meet these obligations could result in payment claims being invalid, disputes arising under SOPA, and a loss of entitlement to be paid, even where the work has been performed.
To find out more, contact HIA's Contracts and Compliance team
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