Building and Construction Debt Collection

Building and construction debt collection is an unfortunate but necessary part of working in that industry.

When operating a business, particularly in the building and construction industry, establishing a relationship with a building and construction debt collection agency and a legal firm is important, as they can take the hard work out of recovering bad debts for you that have accrued in the short or long term.

Rather then letting your invoices become weeks, months or even years overdue, having a process in place to refer overdue matters to a building and construction debt collection agency will help you stay on top of things rather than letting them get out of hand.

When it comes to the building industry, there are payment protection laws which govern and ensure everybody within the building and construction industry is paid in accordance with their terms, in full, by the due date, at all times.

Building and Construction Debt Collection Laws

Payment protection laws are governed by The Building Industry Fairness (Security of Payment) Act 2017 (BIF Act).

This act provides a simple yet detailed list of regulations to protect builders, workers and consumers.

Before commencing a job or a build, there are however a number of ways to protect your rights, some of these include:

  1. Ensure you have a valid contract in place;
  2. Ensure you have a clear understanding of the provisions in relation to payment;
  3. Understand the process for submitting a claim for payment;
  4. Know how to respond to a claim for payment;
  5. Understand what options you have in the case of a dispute or failure to pay on time.

You could also contact a building and construction lawyer to get advice in relation to these things.

Subcontractors’ Charges for Debt Collection

If you are a subbie, then a subcontractors’ charge is a great tool for getting paid if the building contractor goes into liquidation.

With the increase of building and construction companies going into liquidation, a subbie should do all that they can to ensure that they get paid.

The main benefits of a subcontractors’ charge are:

  1. If the person responsible for paying the contractor has kept the money, then they can charge those funds and increases the chance of getting paid; and
  2. The subbie will not be liable to a liquidator for any unfair preference claims (voidable transactions); and
  3. The subbie becomes a secured creditor in the liquidation and can make a claim in the liquidation and get paid first; and
  4. The subbie can still commence or proceed with legal action against the company in liquidation.

There are a number of other good things about issuing a subbies charge, but these are the main advantages.

Under the Building Industry Fairness (Security of Payment) and other Legislation Amendment Act 2020, the following changes have been implemented to support and reinforce payments protections under the BIF Act:

  1. A supporting statement is to be supplied by the head contactor with each claim for payment detailing the status of payment for all subcontractor’s;
  2. Where a supporting statement is not supplied or the information provided within the statement is incorrect or deceptive, the head contractor will receive a penalty;
  3. Where a response is provided to a payment claim along with a schedule for payment however payment under the schedule is not complied with, the contractor will receive a penalty;
  4. Where adjudication proceeds and a determination is made, when satisfied, proof of payment must be supplied by the individual required to pay;
  5. Contractors will have 2 alternative options available, where an adjudicated amount has not yet been satisfied these include a payment withholding request or a charge over property for a head contractor;

It pays to have a clear understanding of your rights, so in the case of a dispute, you know exactly what to do.

Building and Constructions Contracts

Having a valid contract is crucial.  Where an agreement has been made for building work to be completed between parties for work valued in excess of an amount where a licence is necessary, a contract is required.

A “commercial contract” involves contracts to complete or oversee building works such as head contracts, subcontracts, sub-subcontracts, contracts between subcontractors, builders and developers or contracts where an owner-builder permit holder is concerned.

A contract should always include names, contact information, relevant address where the works are being carried out, licence details, a clear explanation of the work to be completed, timeframes or dates around when work is to be completed, the cost of the works, specific dates around when a claim for payment can be supplied (these are referred to as “reference dates”), a due date for payment, details in relation to retention fees, securities and defect liability periods.

Where the terms of a contract are not clear and appear to be outside of the BIF’s Act’s conditions, the following defaults are given under the Act:

  1. Due dates for payment are no more than 10 business days after the claim for payment is provided;
  2. Reference dates being the final day of the month the work is completed;

Taking the time to read over your contract and raising any concerns before the contract is signed could save you time and money down the track.

Its important that you read the contract in its entirety, including any fine print.

If you don’t understand something or have concerns about its contents, seek legal advice.

Record keeping is also important, ensure you keep copies of all written communications including variations, quotes, emails and specifications and avoid verbal communication where possible to prevent disputes.

If you have a bad debt, then contact our building and construction debt collection professionals.

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