Building & Construction
A hotline has been set up for clients to contact us and talk through the challenges you may be facing. If you are in a financial bind, we will provide some initial guidance in relation to credit & finance, supply chain, insurance, restructuring, real estate and construction related matters so together we can work out what your best options are. The number is (02) 8281 7980. You can also visit our online COVID-19 resource page.
21 April 2020 - Sharon Levy
21 April 2020 - Mark Glynn & Jack Williams
Every Day is a Business Day
The Coronavirus pandemic has impacted all areas of the Australian economy in unprecedented ways. During this uncertain period of time, it is critical that construction projects are carefully managed to avoid breaching terms and conditions of the contract.
On 2 April 2020, pursuant to section 10.17 of the Environmental Planning and Assessment Act 1979, Rob Stokes, the Minister for Planning and Public Spaces introduced the Environmental Planning and Assessment (COVID-19 Development – Construction Work Days) Order 2020 (Order).
Pursuant to this Order, the carrying out of building work, or the demolition of a building or work on a Saturday, Sunday, or public holiday, is now permitted; regardless of whether the previously issued ‘development consent’ allows it to do so. It is worth noting however, that there is a general obligation that is placed upon builders, to take reasonable steps to minimise the noise on these additional days, and the Order does identify certain types of works, like rock breaking, rock hammering, sheet piling, pile driving, or similar activities; which are still not permitted to be performed.
In announcing the introduction of the Order, Mr Stokes said “the construction and development sectors, which make up almost 10 per cent of NSW’s economy, will be vital in keeping people in jobs and keeping investment flowing over the coming weeks and months … we’re doing what we can to support the industry in line with the current medical advice by extending weekday construction site operating hours to weekends and public holidays … the extended hours allow the industry to facilitate social distancing on construction sites, while minimising the potential for lost productivity during the pandemic … in NSW there are almost 400,000 people employed in the property and construction industry and we are committed to doing everything we can to keep each of them in work, but most importantly, to keep them safe and healthy”.
It is hoped that the introduction of the Order will mean that whilst the daily progress of projects may diminish as adequate social distancing measures are implemented, the increased working days will enable the projects to be completed on or before the contractual date of practical completion.
20 March 2020 - Jack Williams & David Creais
The SOP Act stops for no-one
A simple google search using the search terms ‘contracts’ and ‘coronavirus’ yields dozens of articles concerning the effect on contracts of ‘force majeure’ and ‘frustration’. However, the Building and Construction Industry Security of Payment Act 1999 (SOP Act) remains immune to these concepts and a contractor in the construction industry is able to ensure prompt payment of invoices by making progress payment claims under the SOP Act.
Making a claim under the SOP Act
To be a valid ‘payment claim’ under the SOP Act, the claim must identify:
the work performed;
the value of the claim; and
that the claim is made under the SOP Act
What can the principal do on receipt of the claim?
Upon receipt of the payment claim, the principal then has 10 business days to respond, either agreeing to pay in full or, if only agreeing to pay in part or refusing to pay at all, the principal must provide written reasons.
Failure to respond?
If a payment claim has been validly served, and the principal fails to respond within 10 business days, the contractor has the option to recover the claimed amount as a debt due to the contractor by court action. In those proceedings, the principal is unable “ to bring any cross-claim against the claimant; or to raise any defence in relation to matters arising under the construction contract”.
A contractor is able to use the SOP Act to assist in ensuring that it’s cashflow remains consistent.
A principal has limited time to respond to a payment claim.
The SOP Act is effective irrespective of events that frustrate the contract or force majeure.
19 March 2020 - Robert Kalde
COVID-19 has created a lot of uncertainty in the building & construction industry, including in relation to supply interruptions, concerns and possible flow on costs.
A significant amount of construction materials are purchased from China including ceramic tiles, sanitary ceramics, doors, lighting, wallpaper and windows. These can often be sourced for up to 30% cheaper than elsewhere. Builders are already suffering delays in lead times due to reduced manufacturing capability, and fewer transport options delaying transit times. Literally many deliveries have to be put on a “slow boat from China”.
The below tips may assist you. As the COVID-19 situation progresses and evolves we will add to and change these as necessary so be sure to check back.
Builders – make sure your building contracts with owners/developers make provision for title passing on payment, rather than delivery, of unfixed or offsite materials. This will protect against increased costs from delayed deliveries, particularly overseas countries (i.e. China), where many bespoke items (ceramics and light fittings) are sourced for residential developments.
Developers – ensure your project is not delayed by interruptions in the supply chain for materials – factor in additional costs for purchasers being unsatisfied about alternate materials being used, where changes have had to be made due to late or non-delivery of items from overseas countries, build these costs into any rate for liquidated damages within your contracts.
19 March 2020 - David Creais
Security of payment – Principals whose businesses are adversely affected by restrictions imposed as a result of the pandemic will begin to suffer cash flow problems unless they have sufficient capital reserves. Banks which are providing funding to these principals may review their funding agreements and cease funding if repayment of loans is likely to be impaired. Contractors should give thought to whether their principal is are likely to fall into these categories and:
Make sure payment claims are made promptly and avail themselves of the security of payment legislation;
Seek assurances (with verification if possible) from principals that the principal has sufficient funding to complete the project;
Make appropriate provision for the possibility that progress payments will be late, partial or not made at all; and
Closely monitor public announcements regarding the principal’s industry generally and the principal in particular.