On 20 August 2024, section 8(2) was introduced to the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA). The provision restricts a contractor’s right to make a payment claim unless they hold the appropriate licence and home warranty insurance under the Home Building Act 1989 (NSW) (HBA).
This amendment prevents unlicensed or uninsured contractors from using SOPA to obtain interim payments.
What does section 8(2) do?
Section 8(2) states that a contractor cannot claim a progress payment for residential building work unless they:
- Hold a contractor licence for the work under the HBA; and
- Have taken out the required home building insurance.
This change plugs a loophole where unlicensed or uninsured contractors could still rely on SOPA to claim payment.
Interpretation
New South Wales courts have not yet considered the interpretation of section 8(2) other than to confirm that it will only apply to payment claims issued after the commencement of that provision into SOPA (i.e., after 20 August 2024) (Rewais v BPB Earthmoving Pty Ltd [2025] NSWCA 103).
However, the Queensland Court of Appeal in Cant Contracting Pty Ltd v Casella and Anor [2006] QCA 538 considered that a contractor was precluded from pursuing a progress claim for not having the relevant building licence.
In that case, Cant entered into a contract with Mr and Mrs Casella for the construction of five poultry sheds. A stop work order was issued by the Council and Cant submitted a payment claim for the partial completion of the works pursuant to the Building and Construction Industry Payment Act 2004 (QLD) (the ‘Payment Act’).
The Casellas claimed that Cant had no entitlement to payment as it did not hold the appropriate licence as required by section 42 of the Queensland Building Services Authority Act 1991 (currently the ‘QBCC Act’).
The Qld Court of Appeal was required to determine whether a contractor who had completed unlicensed building work in breach of section 42 of the QBCC Act, was entitled to be paid under the Payment Act.
Ultimately the Court of Appeal held that an unlicensed contractor is not permitted to make a claim for payment under the Payments Act.
Practical impact of section 8(2)
The introduction of section 8(2) clarifies that rights under SOPA are only available where the contractor complies with the HBA. It also gives homeowners and developers a strong defence where a contractor:
- Is unlicensed or improperly licensed for the work performed; or
- Has not taken out home building insurance as required.
What contractors need to do
The message is clear in that if you carry out residential building work in NSW, you must ensure:
- You hold a valid contractor licence for the type of work;
- You have the required home warranty insurance in place before commencing work;
Failure to comply may invalidate your right to claim progress payments under SOPA, regardless of whether the work was completed.
For guidance on contractor licensing, insurance obligations or SOPA rights, contact a member of Addisons’ Construction & Infrastructure team.