The Australian building industry is significantly over-regulated and is constantly in the spotlight of legislators. In order to try and hold governments to account Integrity New Homes frequently submits submissions to present the perspective from a principle building contractor’s point-of-view. This action also provides a voice on behalf of the Integrity New homes franchisees.
Integrity New Homes recently presented a submission to the New South Wales government regarding proposed changes to the Building and Construction Industry Security of Payments Act 1999 (NSW). The state government seems to think that proposed changes to the legislation will stop/reduce insolvency rates amongst principle contractors by creating the need for deemed statutory trusts – which will add more cost and even more administrative oversight.
One of the reasons for the high rate insolvency amongst principle contractors is because the government has protected trade contractors via the Building and Construction Industry Security of Payments Act to ensure they get paid but have afforded absolutely no protection for the principle contractor to ensure payment by clients/consumers.
The principle contractor signs a building contract with a client who can decide to withhold payments for any reason and the principle contractor has to pursue the client through the court system. This is both time consuming (usually take around two years to get a court hearing and achieve a finding) and expensive (legal costs are high and usually each party has to bear their own costs). Then even when the case is upheld the clients still often don’t pay, so the principal contractor has to spend more money to actually try and get all the monies from the client to which they are entitled.
Governments have made no effort to protect principle contractors from non-payment by consumers/clients. The line goes that in a free-market economy, principle contractors have to take appropriate actions to ensure payment.
However, sub-contractors, who are also private commercial entities (ie not employees) are considered a special interest group who are not responsible for their commercial decisions and require specialist legislation to ensure they are protected and paid. Why are sub-contractors entitled to special protections and principle contractors are not?
If the Minister for Innovation and Better Regulation is serious about preventing high insolvency rates amongst principle contractors then a form of the Security of Payments legislation must be introduced to enforce payment by consumers/clients to principle contractors for works carried out.
It is ironic that at time when governments (in particular) are identifying the escalating cost of housing as being a major social issue, legislators continue to add more and more layers of compliance all of which increase operational costs to principle contractors. There is no doubt whatsoever that all the costs associated with principle contractors complying with this proposed legislative change will be passed directly onto consumers. Make no mistake building costs will increase under these proposed changes to the Building and Construction Industry Security of Payments Act.
Call Richard Bremner today for more information about an Integrity New Homes franchise on ph: 0428 536 021.