Industry Watch – Contract Law – How New Amendments to Construction Law Could Cause Owner’s to Lose Their Rights!

This week in the news we have a couple of stories from around the world about changes in construction law.  While these stories may be from outside of your region, all of them address the global issue of contractor payments.

You may recall a few months ago, we discussed how the specialist lobby group called the Specialist Engineering Contractors’ (SEC) Group out of the UK had laid out an agenda for 2018.  One of their key topics was to improve payment terms for contractors and to seek ways of protecting sub-contractors from the risk of Contractor insolvency.

If you frequent my blog, you also know that this was spurred on by the failure of Carillion in the UK.

This week we begin to see changes outside of the UK to construction laws taking steps towards addressing contractor payments.

Building Industry Fairness (Security of Payment) Act 2017 – Australia

This new law takes effect in in Queensland Australia in December of this year.  It is an amendment to the original Building Industry Fairness (Security of Payment) Act 2017 (which first appear in November 2017).  The Act imposes duties onto owners requiring them to respond within 15 business days (amended to reduce from 25 days) to contractors who have made a payment claim.

The Building Industry Fairness (Security of Payment) Act 2017 specifically stats that it’s main purpose is,

“The main purpose of this Act is to help people working in the building and construction industry in being paid for the work they do.”

For a detailed review of the Act and it’s amendments check out Lexology’s articles on this topic.  You can start with this article on the Amendment here.

Pennsylvania’s Contractor and Subcontractor Payment Act (CASPA or the act) – USA

The other news that caught my eye this week was that Pennsylvania is also amending it’s Pennsylvania’s Contractor and Subcontractor Payment Act (CASPA or the act) which was originally enacted in 1994 to include new provisions limiting an Owner’s right to withhold payments.

The amendment which becomes effective on October 10, 2018 will require Owner’s (and Contractors) who withhold payment from any downstream Vendors to provide a written explanation for the withholding and it adds the that the amount withheld must pass the measure of being “reasonable”.  These provisions are strengthened by a provisions that says that failure to provide written notice results in loss of “basis”.  This means you lose any right to  claim a right to withhold payment without proper notice.  The amendment evens out these stricter provisions by reducing the time required for notice from 7 days to 14 days.

For a more in depth review of the provisions of this amendment, check out Lexology’s review here.

Closing

As more and more governments around the world begin to consider provisions for improving the fiscal health of the construction industry, Owner’s need to beware.

Gone are the days where an Owner could freely withhold payment if they were simply unsatisfied with the work product.  In the future, an Owner will have strict notification duties to ensure their rights are preserved.  Failure to adhere to these notification provisions may invalidate your claim and leave you with little recourse.  Be sure you know your local laws for making payment claims and be sure to strictly and promptly follow any notification requirements.

What about you?  Have you ever withheld payment for completed work?  Did you give a written notice?  Tell me your stories?

Thanks for reading.  If you enjoyed this content, please feel free to browse my previous articles and please like, share, comment, and subscribe.  This helps promote my content and is greatly appreciated.

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