When does the Building & Construction Industry Security of Payment Act apply to the Residential Building work?

Section 7(2)(b) of the Building & Construction Industry Security of Payment Act (‘SOP Act‘)  states that the Act will not apply to a construction contract for the carrying out of residential building work “on such part of any premises as the party for whom the work is carried out resides in or proposes to reside in”.

Generally therefore, the SOP Act will only apply to residential building work performed:

  • under a subcontract, or
  • pursuant to an agreement with a property investor or developer.

While it is clear that the Section excludes construction contracts for the carrying out of residential building work on premises in which the contracting party is or proposes to be resident, a more difficult question may arise where a construction contract involves, for example, the construction of multiple dwellings including one in which a party proposes to reside.

The fact that Parliament opted to limit the exclusion to a construction contract for carrying out work “on such part of” the premises in which the party proposed to reside suggests that the Section should be interpreted so that a construction contract to carry out work on the whole of the premises, in circumstances where the party does not propose to reside in the whole of the premises, will not be excluded by Section 7(2)(b).

It is also important to note that, where a Payment Claim is issued in connection with a construction contract for residential building work, it must, unlike Payment Claim issued pursuant to non-residential contracts entered into since 21 April 2014, clearly state that it is made under the Building and Construction Industry Security of Payment Act 1999.

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By Matthew Bryan