Chapter 7 Legislation affecting security
Calling on Security in Queensland
Security held under building contracts in Queensland is heavily regulated in contrast to other Australian jurisdictions.
Part 4A of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) regulates security in these ways:
- if a principal seeks to use security or a retention amount to obtain an amount owed under the contract, it must give notice of that intention within 28 days of becoming aware of its right to do so (section 67J of the QBCC Act);
- where the contracting party under a building contract is the principal, the total value of the retention or security cannot exceed 5% of the contract price. However, this condition can be contracted out of by the parties if they comply with section 67K of the QBCC Act;
- for subcontracts, the total value of all retention and securities that can be given or retained cannot exceed 5% of the contract price for the subcontract. However, this condition does not apply if the contracting vehicle is a special purpose vehicle (SPV);
- only 10% of each progress payment can be deducted for retention; and
- only 2.5% of the contract price can be withheld as retention or security after practical completion.
The Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act), which came into effect on 17 December 2018, introduced further changes in relation to retention monies and security in the QBCC Act. These changes include provisions for:
- obligations in respect of dealing with retention amounts the subject of the Project Bank Account scheme in Chapter 2 (Division 5); and
- a statutory defects liability period of 12-months for the release of retention or security on contracts that do not otherwise provide for one and which runs from the date of practical completion (s67NA QBCC Act).
Calling on Security in Western Australia
From 1 February 2023, the Building and Construction Industry (Security of Payment) Act 2021 (SOPA) requires:
- Parties to provide at least 5 business days’ (or longer if the contract provides a longer period) notice of intention to have recourse to performance security prior to calling on security (s 57).
- Notice must:
- be in writing and in the approved form (if any are prescribed by the regulations);
- identify the construction contract and the provisions of the contract that the party relies on to have recourse to the performance security; and
- describe the circumstances that entitle the party to have recourse to the performance security.
- SOPA notice requirements override inconsistent provisions in the construction contract.