It is common for those that operate in the renovation side of our sector, particularly those that design, manufacture or install kitchens, bathrooms and laundries, to be unsure about what progress payments or deposits can be legally claimed under a contract.
For a number of years now we have been lobbying the NSW government to increase the deposit and to ‘free up’ the ability for cabinetmakers in particular to claim a progress payment/s between deposit and completion while building custom cabinetry.
As a result of amendments to the NSW Home Building Act, for contracts valued at over $20,000 entered into after 1 March 2015, there are now some new requirements in relation to progress payments that must be complied with.
Progress Payment Schedule
Firstly, as a result of the changes, your residential building contract must contain a progress payment schedule containing details of the progress payments payable under the contract.
All HIA contracts, including the NSW Kitchen, Bathroom and Laundry supply and install contract, provided a progress payment schedule prior to 1 March 2015.
Progress Stages
The changes have also formalised how progress stages are described and progress claims are made. Under a fixed price contract, a progress payment stage must be described in clear and plain language and:
- must be for a specific amount or a specified percentage of the contract price; and
- is only payable after the completion of a specified stage of work, as set out in the progress payment schedule.
Progress payments can also be claimed on the basis of fixed intervals (as determined by the contract) or on an ‘as invoiced’ basis. If this is the case, payments may be claimed for: Labour and materials in respect of work already performed; or
- Labour and materials in respect of work already performed; or
- Costs already incurred (which may include the addition of a margin).
These claims must be supported by invoices, receipts or other documents as may be reasonably necessary to support the claim.
…BUT, has anything really changed?
While there were few formal rules on the content of progress payment claims in NSW prior to 1 March 2015, there was a general rule that the amount claimed under each stage should be reflective of the actual value of work completed within that stage. Further, the work described in a progress stage needed to be completed before a claim or invoice was submitted to the client – progress payments could not be claimed in advance of work being done.
The same approach applies under the new requirements. However, while the new provisions aim to give consumers better information about payment arrangements before the contract is signed, the changes also provide increased certainty as to the permissible structure and content of progress payment stages and claims.
For more information regarding this issue HIA members can contact HIA Workplace Services on 1300 650 620.
Craig Jennion
HIA Executive Director – Hunter