Provisions of the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2020 (Qld) (the Act) will take effect on 1 October 2020, introducing significant payment security reforms.
In particular, the Act introduces a new remedy for head contractors that have not been paid an adjudication debt by a principal/client following the filing of an adjudication certificate. This remedy allows a head contractor to request a charge over the property on which construction work was carried out where:
- the construction work or related goods and services relate to the adjudicated amount; and
- the principal/client, or a related entity, is the registered owner of the property.
Importantly, this charge is lodged with the registrar of titles and is to exist for 24 months after registration unless discharged, set aside, or the adjudicated amount is paid.
Additionally, a head contractor is able to enforce the charge by application to the Court for orders that the property is sold, which will authorise the sale of the property free of all encumbrances and will have effect regardless of any encumbrances. The Act defines ‘encumbrance’ to mean:
- a mortgage, lien or charge over the property;
- a caveat claiming interest over the property by way of security; or
- a writ affecting the property.
This mechanism means that a head contractor is able to apply to have the property sold, even if there are prior encumbrances.
On settlement of sale of property ordered by the Court, sale proceeds would be applied in the following order:
- first – payment of sale costs and the head contractor’s costs in seeking the sale;
- second – payment of amounts to satisfy any registered encumbrances, including the charge registered by the head contractor, in the priority order under the Land Title Act 1994 (Qld); and
- third – payment of any balance to the registered over of the relevant property or to another at the discretion of the owner.
This is a very powerful tool available to head contractors because it provides them with practical, relatively straightforward and economical leverage to force compliance by principals/clients or risk serious ramifications that typically otherwise only eventuates in very limited circumstances.
To avoid any charges being registered and enforced, principals/clients should ensure that any adjudication amounts are paid as a matter of priority. Under the Act, payment must be made 5 business days after the adjudicator’s decision, or a later date if decided by the adjudicator, so it is important that principals act quickly to prevent the registration and enforcement of potential charges.
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