Many Queensland subcontractors are not aware of the full debt recovery power of subcontractors charges in Chapter 4 of the Building Industry Fairness (Security of Payment Act) 2017 (Qld) (BIF Act).
Subcontractors charges are powerful tools able to transform an unsecured debt into a secured debt by undertaking a simple administrative process. In the case of unpaid subcontract retention money that process can be completed long after the subcontract work is complete.
In the current high risk environment of contractor insolvency (and ongoing delays to the roll out of project and retention trust accounts in the private sector), subcontractors are well advised to educate themselves on the proper use of subcontractors charges.
Subcontractors should carefully consider utilising subcontractors charges to secure unpaid subcontract retentions within the last 2 years because the option of securing payment may still be open.
A QBCC Form s122, if properly given to both the principal and head contractor (or head contractor and superior subcontractor as the case may be) as a retention only subcontractors charge under s122(8) of the BIF Act can be issued long after completion of the subcontract work, and in some instances long after expiry of the subcontract defects liability period.
A QBCC Form s122 retention only charge may be issued within 3 months after expiry of the defects liability period for the head contract or superior subcontract.
This deadline is often mistakenly interpreted as within 3 months after expiry of the defects liability period for the subcontract (and not the head contract or superior subcontract), which may have expired many months or years earlier.
Importantly, retention only subcontractors charges secure payment against all money payable under the head contract or superior contract (and not just retentions or security retained under the head contract or superior contract).
Key matters to consider:
1. Is the unpaid retention money in relation to work under a subcontract?
2. Does the retention money concern work as defined in s105 of the BIF Act? This is a more confined definition compared with ‘’construction work’’ under s65 of the Act. It includes supply of materials and project-specific components (including off-site fabrication) and site labour and excludes the mere supply of goods, site labour hire, testing of materials and site measurements and mere hire of plant and machinery;
3. Has the defects liability period under the head contract expired? If so when? Information in this regard can be requested from the head or superior subcontractor under s119 of the BIF Act; and
4. Is the release of retention money disputed? If so, subcontractors need to assess the commercial benefit of commencing the process because to maintain the validity of the subcontractors charge, Court proceedings are required to be commenced within 1 month of issue.
If the issues above are answered favourably, the completed QBCC Form s122 must be given to both the principal and head contractor to effectively secure the debt.
The QBCC Form s122 must also be signed by a qualified person with no financial interest in the work (i.e. engineer or architect or person having expert knowledge of the work) to independently verify the claimed amount.
The end of the financial year is an opportune time for subcontractors to revisit their bad debts, including unpaid retention money long overdue and consider the option of a subcontractors charge.
