The current pandemic has introduced many challenges to businesses across Queensland and its impact on the building and construction industry is no exception. Whether it be delays caused to completing a job because workers need to isolate or supplies are not available, or because individuals do not want to invest in new projects or simply run out of money to continue existing projects during uncertain times then it can impact many contractors or subcontractors involved in the sector.
One option available to subcontractors to secure payment is they can issue a notice of a claim for a subcontractors’ charge in relation to unpaid work performed by them on a project by giving a prescribed notice to a principal or relevant security holder, and providing a copy to the contractor, in accordance with the Building Industry Fairness (Security of Payment) Act 2017.
The purpose of the notice is to notify a principal or security holder that a subcontractor has not been paid for work performed on a project at the request of a contractor so that money can be retained by the principal or security holder pending determination of any liability by the contractor to pay that amount to the subcontractor. This can be particularly helpful if a contractor has or will shortly be placed into administration or liquidation, or bankruptcy.
One of the major pitfalls of a subcontractors’ charge is that there is a time limit in which notice of a claim is required to be provided. This time limit primarily requires a subcontractor to give notice within:-
- three (3) months from practical completion of the work for which payment is sought; or
- three (3) months from expiration of the defects liability period if the claim relates to a retention amount under a contract.
Importantly, any notice of a claim for a subcontractors’ charge must comply with the legislative requirements otherwise the risk is that the notice is not valid and will not secure payment. This includes ensuring that the notice is in the prescribed form, contains the necessary details, and has been issued and served within time on the correct parties such as the contractor, principal and any security holder.
Once notice of a subcontractors’ charge has been issued then it provides an opportunity for a contractor to issue a response either admitting liability for payment in full or in part, or to dispute the claim. If liability for payment is admitted then the principal or security holder can pay the retained amount to the subcontractor subject only to a few exceptions. Alternatively, if the claim is disputed by the contractor or no response is received then a subcontractor must issue proceedings in Court to substantiate a subcontractors’ charge within:-
- one (1) month after the notice of claim was first issued; or
- four (4) months after the retention amount becomes payable if the claim relates only to a retention amount.
Failure to issue proceedings within the prescribed period will result in the subcontractor’s charge being extinguished.
Unfortunately, a subcontractors’ charge is not available to every subcontractor that may be owed money and it is important that you seek advice to determine if you are eligible to lodge a subcontractors’ charge and if it would be in your interest to do so given there can be a number of pitfalls. Although a subcontractor’s charge is one possible pathway to secure payment for an amount owed to a subcontractor, it is not the only option available and so specific advice should be sought based on your circumstances.
