Almost every contract for building work on common property is subject to the provisions of the Building and Construction Industry Security of Payment Act 1999 (“SOPA”).
Amongst other things, this Act provides:-
- Payment of a claim can only be disputed if a payment schedule is served on the builder within 10 business days of receiving the claim.
- A payment schedule must set out the amount which the owners corporation is prepared to pay, why that amount is less than the claimed amount and the reasons for withholding payment.
- Failure to serve a payment schedule within 10 business days of receiving the claim will mean that the owners corporation becomes liable to pay the claimed amount and cannot raise any cross claim or defence arising under the contract.
- If a payment schedule is served within time the builder may still take the matter to adjudication.
- The owners corporation cannot raise any defence in the adjudication which was not raised in the payment schedule.
- The owners corporation will have five business days from the date of service of the adjudication application to lodge its response.
The Problem
SOPA time limits are short and can not be extended.
The owners corporation may need legal assistance to prepare a payment schedule or an adjudication response. That assistance may be estimated to cost more than the amount set out in Regulation 15 of the Strata Schemes Management Regulation 2010. In such a case the SOPA time limits will expire before an owners corporation can authorize the provision of legal advice and its legal rights will be lost.
The Solution
Whenever an owners corporation enters into a construction contract for the common property it should pass, at a general meeting, a resolution authorising the obtaining of legal advice in relation to the contract and SOPA matters based on a fee estimate provided by a solicitor. For matters where the building contract is approved by the executive committee, it is often the case that a general meeting will be scheduled during the contract negotiations or shortly after. In such a case a motion should be placed on the meeting agenda.
Many thanks to J.S Mueller and Co Solicitors for providing this article.
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