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Security of Payment - Coverage
The Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOP Act) applies to some construction contracts but excludes others. Before you make a claim under the SOP Act, it is important to confirm that your contract is covered.
Wednesday, 10th August 2022
What types of contracts does the SOP Act cover?
There are several factors to consider when establishing whether your contract will be covered by the SOP Act.
1. The contract must be a ‘construction contract’.
‘Construction contract’ means a contract, agreement or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party.
2. The contract must be for ‘construction work’ or ‘related goods and services’.
Construction work includes, but is not limited to:
- the construction, alteration and addition of buildings, structures and civil works
- demolition, site clearing, earthworks and laying foundations
- cleaning, painting, decorating and other surface treatments
- the installation of services in buildings including electrical, plumbing of gas and water, HVAC, fire protection, irrigation, security, communications and vertical transport systems
- work with cranes, scaffolding and other temporary buildings or structures
- site restoration and landscaping.
Related goods and services include, but are not limited to:
- goods including:
- materials or components to form any part of a building, structure or civil work
- the sale or hire of plant or materials for use in connection with the carrying out of construction work
- services including:
- building labour
- professional services such as surveying, testing, design, drafting and engineering.
3. The contract must not be for ‘home building work’.
The SOP Act will not apply if the contract is for ‘home building work’ and is:
- for the construction of a single dwelling
- with an individual home owner
- not carried out for the purpose of a business
- less than $500,000.
The definitions related to home building work under the SOP Act are aligned with those in the Home Building Contracts Act.
Common examples
Some examples of contracts that are covered by the SOP Act include those between:
- builders and contractors, such as trades and suppliers
- individual homeowners and builders where the work is worth more than $500,000
- builders and property developers or commercial clients
- builders and individual homeowners for the construction of two or more dwellings.
The table included at Appendix A may be of further assistance in determining whether your contract is covered by the SOP Act.
What does it mean if my contract is covered by the SOP Act?
If the SOP Act applies to your contract with a client, it will entitle you to:
- make a payment claim under the SOP Act
- receive a payment schedule detailing any disputed amounts
- lodge an application for adjudication against them in the event of non-payment.
If your contract is with a contractor, including a tradesperson, supplier or consultant, it means you:
- may receive a payment claim from the contractor
- should provide a payment schedule to the contractor for any disputed amounts
- may receive an adjudication application from a contractor in the event you don’t pay them or if they disagree with the payment schedule.
Appendix A
| I am a: | I am contracting with | The contract is for: | |||
| Home building work worth up to $500,000 | Home building work worth over $500,000 | Commercial building work | |||
| Single dwelling | Multiple dwellings | ||||
| Builder | Property owner: | ||||
| - Individual | No | Yes | Yes* | N/A | |
|
- Company - Strata body - Property developer |
Yes | Yes | Yes | ||
| Tradesperson or supplier | No | No | No | ||
| Tradesperson or supplier | Property owner: | ||||
| - Individual | No | Yes | Yes* | Yes | |
|
- Company - Strata body - Property developer |
Yes | Yes | Yes | ||
| Builder | Yes | Yes | Yes | ||
| Another tradesperson or supplier | Yes | Yes | Yes | ||
| Individual homeowner | Builder, tradesperson or supplier | No | No | No | |
| Company, strata body or property developer | Builder, tradesperson or supplier | No | No | No | |
*The claimant must provide the respondent with a copy of the prescribed ‘homeowner’s notice’ at the time of making the payment claim.
To find out more, contact HIA's Contracts and Compliance team
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