Building and Construction Part 4: Unlicensed/Uninsured Builders Not Entitled to a Progress Payment under SOP Regime

The effect of Sunshine East Pty Ltd v CBEM Holdings Pty Ltd [2023] NSWSC 744 as it relates to the right of a contractor to claim payment under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act), notwithstanding that the contractor is unlicensed and/or uninsured for the purposes of the Home Building Act 1989 (NSW), has been overridden by an amendment to s 8 of the SOP Act.

Clause 1.2 of Schedule 1 of the Better Regulation Legislation Amendment (Miscellaneous) Act 2024, commencing 20 August 2024, inserts news 8(2) to the SOP Act:

“2) A person is not entitled to a progress payment under subsection (1) if the construction contract—

(a)  does not comply with the Home Building Act 1989, section 4, or

(b)  involves construction work that is residential building work done in contravention of the Home Building Act 1989, section 92”

This amendment closes the loophole of builders who are unlicensed and/or uninsured being able to issue progress payments under the SOP Act (where it applies to owner-occupier contracts) and thereby providing protection to homeowners undertaking work that is captured by the Home Building Act 1989 (NSW) and the SOP Act.

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Copyright declaration: the text to this article is extracted from the Security of Payment (NSW) chapter in the Thomson Reuters for the loose-leaf subscription service, Commercial Arbitration Law & Practice, contributed by Vikram Misra.

Vikram Misra

In the fourth part of the building and construction series, Vikram Misra, Barrister at Clarence Chambers, considers how the 2024 amendment to the SOP Act closes the loophole that allowed unlicensed or uninsured contractors to issue progress payments, aligning it with the Home Building Act 1989 to strengthen homeowner protections.