The nature of payment problems in the new zealand construction industy.pdf

Contractors liens 1939 act was in effect and provided

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Contractors’ Liens 1939 Act was in effect and provided security to head contracto rs, subcontractors and workmen who perform work upon or in respect of any land by claiming a lien over the estate or interest of the owner in the land (s.21). Workmen and subcontractors were entitled to a charge over money payable under any superior contract for the work (s.21). However the repeal of the Act in 1989 left contractors and subcontractors unsecured. The removal of conditional payment provision (pay-if-paid and pay-when-paid) with the repeal of the 1939 Act, enabled subcontractors to get paid on time whether or not lead contractors are paid by the client. This protects contractors also as they may be in better position to understand the client’s financial status and procure necessary security, which may be required in the event of insolvency. In spite of these enactments, there are anecdotal evidences to suggest that the payment problem persists, albeit in different forms. Davenport (2005) commenting on the Building and Construction Industry Security of Payment Act in New South Wales, explains that the payment mechanism in that Act could lead to disputes. The disputes may derive from payment schedules such as non-issuance of payment schedules, and differences between claimed and schedule amounts. Ultimately such disputes lead to payment delays and in some cases losses to the claimants. With reference to the CCA, New Zealand, the default provisions set out in sections 16 to 18 of the CCA only apply when a party fails to agree on the provisions of the standard forms of contract. Also the statutory payment right given in the CCA is not applicable when there is no contractual right specifying the payment. Thus the provisions in most of the standard form of contracts such as NZS3910:2003 and NZS3915:2005 supersede the provisions of the Act with regards to progress payments. Both standards provide contractors contractual rights to claim for progress and final payments. The payment procedures differ slightly. In case of progress payment, the NZS3910 requires payment to be made 17 working days after a progress payment claim (PPC) is served while NZS3915 requires the payment to be received between 10 and 15 working days respectively. The NZS3915 provision depends on whether or not there is dispute on the proposed progress payment schedule (PPPS). If no PPPS or progress payment schedule (PPS) is given, the PPC becomes PPS and the payment is made within 17 working days of the claim served. Similarly, both standards require the claimant to claim final payment within 2 months of the expiry of any defects liability period. The payment becomes due in 25 working days of receipt of a claim in NZS3910. In NZS3915 the claimant receives the payment within 22, 32, and 34 working days of payment receipt, if no disputes on proposed final payment schedule (PFPS), dispute on PFPS, and no PFPS/FPS is issued, respectively.
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  • Fall '19
  • The Land, Australasian Journal of Construction Economics and Building

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