The importance of negotiating all specifics with your tradie to avoid bill shock!

New legislation came in to effect today that means homeowners who don’t pay their tradies can be made to pay by having the dispute taken out of their hands and assessed by an independent adjudicator via the ‘Security of Payment Act’ that previously only applied to commercial building work.  The process takes 5-6 weeks and payments owed must be made in 5 business days.  Homeowners need to know their rights.  Anthony Igra is a specialist in the Act and has recovered $70 million dollars for commercial tradies since 2006.  He has some great advice.

Credit: Pixabay

Homeowners who don’t pay their trade contractors can be made to pay by having the dispute taken out of their hands and assessed by an independent adjudicator.  The unpaid tradie can use a 20 year-old, little-known “Security of Payment Act” that previously only applied to the commercial building industry. The Act was recently updated to also apply to residential homeowners. 

Last year more than $451 million was paid to NSW commercial trade contractors via the Act for money they were owed. Now, this figure is set to climb when the Act widens its net to encompass homeowners who employ trade contractors and refuse to pay them.

Anthony Igra, Managing Director of Contractors Debt Recovery, is a specialist in the Security of Payment Act and has recovered over $70 million using this process for commercial trade contractors:


“For years a tradie could use the Act to recover $3,000 for painting a factory wall but couldn’t use it to recover $30,000 for painting Mrs Jones’s house.  Finally, the NSW Government has listened and made this long-overdue change.  Homeowners take note; if you take on a builder, plumber, electrician or other trade contractor to work on your home, make sure you pay them for the work because from 1st March, an adjudicator can decide on the payment for you,” he said.

The change has been welcomed by many trade contractors who are fed-up with not getting paid and often go out of business, lose their homes, or their families fall apart, because they can’t stay afloat.  

Shane Howson of Utopian Gardens, a landscape gardener, used to build bespoke gardens for homeowners. He left that type of work due to repeatedly being ripped off by the owners who would wait until he’d just completed, and then throw him off the site and lock him out.

“I was often left tens of thousands out of pocket. They’re enjoying the garden I just built them, locked me out, and left the final two payments unpaid. I don’t have time or funds for court, so I’d have to walk away. This change to the Security of Payment Act will change everything. Now you’ll be able to have the argument and get a decision,” he said.

David Moses, Managing Director of Horizon, one of Sydney’s premiere residential building firms, said; “This has been a long time coming, and we welcome the change. It will allow residential builders and their subbies to resolve disputes in an independent, fair and reasonable way and get paid much quicker – taking the emotion out of what is an emotional process for all involved. It will also force everyone to document everything better and make everyone accountable for their part in the collaborative process.”
Ross Gagic, director of builder CBS Build is still owed $130,000.00. His contract predates the changes and so he cannot use them. “My client took advantage of the fact that the Security of Payment Act did not apply to primary residences. Despite a reem of correspondence agreeing to extra works, now he denies they are extra.” Mr Gagic has fenced off the property until he is paid as the contract allows this. “I’d rather have been able to resolve this via adjudication, get my money, and leave. Things will be much better when this change takes effect.” he said.

Anthony Igra advises homeowners to get familiar with the Act and its implications.   “Until now, residential building disputes could only be decided via NCAT (the Civil and Administrative Tribunal), which could be a lengthy and costly procedure. Under the new terms of the Act, a trade contractor can make a submission to be decided upon by an independent adjudicator, regardless of whether the homeowner makes a submission or not.  The process takes about 5-6 weeks and any amount found to be owing to the contractor must be paid within five business days.  Timings and procedures under the Act cannot be delayed, postponed, extended, or adjourned – there will be no escape for any homeowner who doesn’t pay.”

Here, Anthony shares his advice for homeowners looking to engage a builder or trade when the changes come into place:

1. Have the Money: It may sound stupid, but only contract for work that you can afford. And that means afford with at least a 10 per cent buffer. There’s no point blowing your budget before a brick is laid, and then blaming your builder.

2. Don’t Fly Blind: Stay away from ‘Cost-Plus’ contracts. The work always costs a lot more than estimated. You need to know you can pay for it at the start. Stay with lump sum (Agreed Price) contracts.

3. Use a Department of Fair-Trading Contract: Don’t settle on oral quotes or one-page bullet point quotes. These contracts are fair and balanced, comply with the Home Building Act, and help both you and the contractor act reasonably.

4. Watch those Variations: These are all the little extra works along the way that you think will not amount to that much. They all add up! And fast. Agree on a cost upfront and make sure the contractor and you agree on the list of variations to be done. I’ve seen a lady add $60,000 in costs in a month! In her own mind, it was only $5,000!

5. Write it Down: Reduce every agreement to writing as soon as you can, no matter how small. Even if it’s just a change to the laundry sink taps. Email is a perfect device for this as it time-and-date stamps the agreement, and what was agreed.

6. Specify everything: Work on your home involves products and materials for which there are endless choices. Do the legwork and define exactly what you want; by brand, colour, supplier, size, position, model number, etc. Nail it down then ask for a quote. If you don’t, the contractor will choose a cheaper option, when you’re after a better option; and there’s your payment dispute! So specify, specify, specify!

7. Don’t set yourself up for ‘Bill Shock’: Every month sit down with your contractor and compare a summary of the works and costs. This should comprise two lists. The first list is the list of contract works that are completed, and value completed. The second list is the variations and should set out all the extras and the cost. By doing this every month there will be no ‘bill shock’ at the end and will also allow agreement on each months’ invoice.

8. Don’t be a Psycho: How many tradies have complained to me that Mrs Jones, who was so lovely during the work, made him coffee, talked about their kids, and shared the odd biscuit, …. morphed into an evil nutcase upon receipt of the final invoice.

Credit: Natalia Vaitkevich

Take a breath and be reasonable.
Any home building is complex work. There will be mistakes on both sides, defects, rework, delays, specification errors, and weird things that arise out of nowhere that no one ever expected. That is the nature of construction work. Just deal with things in a reasonable manner. With few exceptions, your contractor is not out to rip you off, do a poor job, or hurt you. So don’t use these problems as excuses not to pay for the work. At the end of the day you want good work completed as soon as possible. Your builder is there to solve those problems with you.

The Security of Payment Act – What You Need to Know
“The Security of Payment Act provides a method for having payment disputes decided by an external adjudicator based on written arguments from both sides. If you receive a Payment Claim from your builder or trade contractor endorsed under the Security of Payment Act, then you need to respond in a particular way. It is not like an invoice that you can attend to at leisure. There are strict timelines to follow. If you don’t you may find yourself unable to defend the claim made against you,” says Anthony Igra, managing director of Contractors Debt Recovery, specialists in the Security of Payment Act. 

Here is Anthony’s advice to homeowners who engage a trade contractor after 1 March 2021 when the Act changes to encompass residential home owners:

1. If you receive a Payment Claim you must do one of two things; 1) Pay the amount in full, or 2) Pay less than the claimed amount and provide a Payment Schedule to the contractor.

2. A Payment Schedule is your response to the claim. This schedule must 1) be in written form, 2) set out what you are prepared to pay (The ‘Scheduled Amount’), and 3) detail reasons for not paying the difference between the claimed and scheduled amounts.

3. Include as much evidence as you can to support the amount you are not willing to pay.

4. Make sure you include ALL the reasons you will later rely on as you will not be allowed to include any new reasons later on.

5. The Payment Schedule must be received by the Contractor within 10 business days of your receipt of the payment claim.

6. Make sure you provide a payment schedule every time you get a claim. If you fail to respond to the claim within 10 business days, the contractor can seek default judgment against you in court immediately.

7. If you fail to provide a payment schedule, and the Contractor wants to have the matter decided by an adjudicator, you will have one last final chance to provide a schedule. You will be advised of this by a notice sent to you by the Contractor. You will have only 5 business days to provide a schedule in response this notice.

8. Claims and Schedules can be served by post or email, but not fax.

9. If you provide a Payment Schedule to the contractor, then he/she will have 10 business days to lodge the application for an adjudication. You will first be aware of this when you receive your copy of the application. An adjudicator must complete a written decision within 10 business days of the application being lodged.

10.  If you have provided a Payment Schedule then you will have the opportunity to make a response to the application, but you will not be able to include any new reasons not already set out in the Payment Schedule.
The entire process from a payment claim to a decision takes only 5-6 weeks. Be aware that if you decide not to respond to the process at all, the matter will go ahead regardless and will be decided only on the contents of the Contractor’s application. So above all, engage with the process and run your case.
 

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