Security of Payment Act Tasmania: a practical builders guide

What it is

The Building and Construction Industry Security of Payment Act 2009 (TAS) is Tasmanias version of the East Coast model used in New South Wales, Victoria, Queensland and the ACT. It gives any person who performs construction work or supplies related goods and services in Tasmania a statutory right to make a payment claim, force a response and run a fast adjudication if the claim is not paid.

The Act exists to fix one problem. In a building dispute the party that holds the money has all the power. The Act removes that power by making non-payment a costly exercise on a tight clock.

Who it applies to

The Act applies to construction contracts for construction work carried out in Tasmania. That covers most residential and commercial construction work, including site preparation, building work, services installation and any related goods or services supplied to a construction site.

Some contracts are excluded. The main one for residential builders is a contract with a homeowner who is also an owner-occupier. The Tasmanian Act applies to that kind of contract only if both parties agree, which in practice means it is not used. The Act is therefore most useful on subcontract chains, on commercial work and on dealings between builders and developers.

The payment claim

A payment claim must be in writing and identify the work, the amount claimed and the contract. It must state that it is made under the Building and Construction Industry Security of Payment Act 2009 (TAS).

A claim can be served on any of the following reference dates:

• The date set in the contract for making claims
• The last day of the month in which the work was first done, and the last day of each following month if the contract is silent

A claim can be made up to 12 months after the work was last carried out or 12 months after a written variation request was last made, whichever is later.

The payment schedule

After a payment claim is served the respondent has 10 business days to give a payment schedule. The schedule must identify the claim, state the amount the respondent proposes to pay, and if that amount is less than the claimed amount, state the reasons and the reasons for withholding any amount.

The 10 business day window is extended to 20 business days where the respondent is a homeowner who is not a licensed building practitioner and the claim relates to a residential structure. That carve-out matters for any builder dealing with an owner-occupier client.

If the respondent fails to give a schedule, the claimant can either sue in court for the unpaid amount or proceed to adjudication. The respondent cannot then dispute the amount in adjudication because of the failure to schedule.

Adjudication

If the claimant disagrees with the scheduled amount they can apply for adjudication within 10 business days of receiving the schedule. If no schedule was given the claimant must first give notice and a second chance to schedule, then apply within 10 business days.

The application is lodged with an Authorised Nominating Authority. In Tasmania the main ANAs are Adjudicate Today and the Master Builders Association of Tasmania. The ANA appoints an adjudicator and forwards the application.

The respondent has 5 business days to provide an adjudication response. The adjudicator then has 10 business days from acceptance to make a determination, unless the parties agree to extend.

Payment after determination

The adjudicated amount must be paid within 5 business days of the determination being served unless the determination specifies a different date.

If the respondent fails to pay, the claimant can:

• Suspend work after giving 3 business days notice
• Lodge the determination as a judgment in the Magistrates Court or the Supreme Court and enforce it like any other judgment debt

The right to suspend work without losing rights under the contract is unique to the SoP Act. It is a strong tool when used correctly. The 3 day notice requirement is strict.

What it is not

The Act is not a substitute for proper contract administration. An adjudicator decides the dispute on the documents in front of them. If the claimant has no records, no signed variations and no time-stamped delivery dockets the adjudicator has nothing to work with.

The Act is also not designed to resolve complex defective work claims. An adjudicator working to a 10 day clock cannot run a defects trial. Where defects are the real issue the matter usually belongs in the Magistrates Court or under the residential building dispute jurisdiction of the Building Practitioners Board.

Practical points for Tasmanian builders

Endorse every progress claim with the words "This is a payment claim made under the Building and Construction Industry Security of Payment Act 2009". Without that endorsement the claim is not a payment claim and the Act does not engage.

Diarise the 10 business day schedule deadline. Diarise the 10 business day adjudication application deadline. Missing either deadline locks the claimant out.

Use the suspension right carefully. Three business days written notice is the minimum, and the notice must be properly served. A failed suspension exposes the builder to a damages claim from the principal.