PLUMBING CONTRACTORS: HOW TO LIMIT YOUR LEGAL EXPOSURE, MAXIMISE PAYMENTS & KNOW YOUR RESPONSIBILITIES
By Justin Cotton, Partner and head of practitioner advocacy, Lovegrove Smith & Cotton
Plumbers enjoy a privileged position because they are registered building practitioners. In a similar way to registered builders, engineers, draftsmen and building surveyors. With this though comes legal responsibilities and the need to have professional indemnity insurance.
Plumbing responsibilities in Victoria are outlined in the Building Act 1993 at Part 12A. This however needs to be read in conjunction with the Plumbing Regulations, which in turn call up the Plumbing Code of Australia. Some of the key provisions in the Building Act are summarised below.
s221D – plumbing work only to be carried out by a licensed or registered plumber (exemptions sheet metal work, taps).
s221ZPA – Documents before starting work must be given to the person who ‘commissioned’ the work – name, license no. & address of the plumber must be included.
s221ZW – Rectification notice – 10 days to rectify – from Victorian Building Authority – Appeal to VCAT – 5 business days.
s221ZH(2) – Within 5 days of completion – must hand over Certificate of Compliance & Notify the VBA of completion.
s221ZH(2A&2B) Must provide Compliance Certificate within 5 days of a written request even if work is not complete.
Plumbing Regulations 2008
Reg 7 – calls up the Plumbing Code of Australia (“the PCA”) in Schedule 2 – & calls up Australian Standards. The Code changes all the time.
National Construction Code (3 volumes) Volume 3 Plumbing Code
Start: 1 May 2015. Free download www.abcb.gov.au to register
Note: Supplier’s/Manufacturers installation instructions/procedure.
Reg 10 meaning of ‘plumbing work’ is defined here, including a list of times that are not to be regarded as such.
Plumbing work is not domestic building work (Domestic Building Contract Regulations 2007) – Reg 6(h) if it is carried out on its own and not with other aspects of work on a domestic building site.
Reg 14 – standard of plumbing work – ‘good and workmanlike manner’
- It is done to an acceptable industry standard;
- It complies with the Plumbing Code of Australia; and
- It is done in accordance with the manufacturer’s specifications.
Make sure the important details are all in writing and understood.
Make sure the drawings (tender and stamped) and the specifications are consistent & comply with Regs and the Plumbing Code of Australia;
Make sure you agree with the quantities (no variation allowed e.g. your quote and their purchase order). Read the purchase order.
You cannot agree to do illegal plumbing work. For example, work without the requisite registration.
You can as a plumbing contractor bring your payment claims under both the Contract (or Subcontract) and also under the legislation, being the Building and construction Industry Security of Payment Act 2002 (“the SOP Act”).
2 main progress stages in plumbing: – 1. Rough in 2. Fit off.
Make sure you do not have a big balloon payment at the end. Instead try to have interim progress claims. These could then be included in a Subcontract Agreement or in a Quotation / Terms of Engagement document.
An example of staged payments could be:
- Rough in claim
- Kitchen plumbing
- Bathroom plumbing
- Laundry plumbing
- Final Fit Off
Try to ensure that you obtain full and final payment before the Compliance Certificate is handed over, ie make it a term of your contract that your final payment is due before the Compliance Certificate is provided.
Other Contract Tools
Suspension Notice & Extensions of Time are potential tools that can be included in a Subcontract Agreement to assist a plumber. For example, to suspend if you are not paid on time, or to extend time if you are delayed for reasons outside your control.
Default Notice, for example if a progress claim is not paid on time, is another contractual tool that can be considered.
Back charges – be wary of these on commercial jobs. An example would be large commercial projects where you have a subcontract for plumbing with a head contractor and liquidated damages could be inserted at a very heavy rate.
Withhold the Certificate of Compliance – can it be done?
The answer is that it is unlawful to withhold a Certificate of Compliance when the plumbing works are fully complete, given the health and safety aspects of plumbing and electrical work. These Certificates are not to be used as a tool or bargaining chip to extract disputed payments.
What if you are terminated from a project before it is complete? In that case you can issue a Compliance Certificate for all work you have done up to that point but you need to indicate on the Certificate that works are not complete.
The final Compliance Certificate is only issued once all works are fully completed and can then be relied upon by the Relevant Building Surveyor when an Occupancy Permit or Certificate of Final Inspection is approved.
These should be notified in writing in a ‘variation notice’, with details of the extent, extra time and cost & get the variation notice signed – ideally before the variation works are done.
Non-approved or disputed variations can sometimes be ‘excluded’ under the SOP Act. It is a complicated formula and depends on the value of all the variations that are disputed and the total contract price. With variations that are understood and approved, these are generally always able to be included in claims under the SOP Act.
EOT Claims (Extension of Time)
Extension of Time claims are very important and can make a huge difference to monetary entitlements.
They affect whether a head contractor can claim LDs (liquidated damages) against you.
- If in doubt make a claim in writing;
- Don’t accept ‘no worries, we’ll work it out later’;
- LD’s can be catastrophic. – Final claim damage.
The Authority will judge your work according to the PCA; do not agree to cut corners. You are a building professional.
Reg 7 Domestic Building Contract Regs 2007 – Plumbing work is not domestic building work. So if you are sued by a builder/owner or you sue, you go to Court. The type of Court depends on the amount in dispute.
However, you can be joined to a VCAT proceeding as a co-respondent to a domestic building defect dispute, or if you did more than just Plumbing works then your works can be ‘domestic building’ within the scope of VCAT matters.
Pursuant to Reg 8 of the Domestic Building Contract Regs 2007 – works outside the land for the purposes of subdivision, sewerage, drainage, water supply are also not domestic building works.
Certificate of Compliance – why? An Occupancy Permit or Practical Completion certification will depend on this certification. This means that your work is of real value because the final Compliance Certificate is only issued when works are fully complete, and is needed by the RBS to issue an Occupancy Permit or Certificate of Final Inspection.
Make notes on the Certificate of Compliance if necessary, and have in your contract a provision that payment in full is to be made prior to issuing of a final Certificate of Compliance.
You can make notes on a Certificate of Compliance to say that works are not complete, are complete to a certain stage only, or is only ‘interim’, if any of that is the case.
If the Authority determines there are defects, then you should fix them or be aware that you may be charged for fixing defects. Front foot any defect claims.
Outstanding defect claims can affect insurance and if there is no insurance then no license. The Insurance liability period is 6 years, for you as the contractor 10 years post completion of works is the liability period.
The 10 year liability cap is at section 134 of the Building Act 1993 and refers to the time limit of 10 years from the date of issue of an Occupancy Permit / Certificate of Final Inspection, within which to initiate a building action at court or VCAT.
BUILDING & CONSTRUCTION INDUSTRY SECURITY OF PAYMENT ACT 2002
Section 14 – a valid payment claim must include a description of the work, the amount, and the fact it is made under the SOP Act.
The invoice must say words to the effect:
“This is a payment claim made under the Building and Construction Industry Security of Payment Act 2002.”
It must properly set out the works done and the value of the works in that payment claim. You cannot claim for consequential costs such as delay costs, or contract related damages. It is just the value of your work plus some variations.
If the respondent to your claim (eg a head contractor, builder) does not give you a written payment schedule in response to your payment claim within 10 working days, then the amount of your claim can be deemed due and payable within the applicable time under the subcontract.
If you dispute the amount certified in the payment schedule, then you can go to Adjudication (which is generally far quicker than Court) or you can file proceedings at Court.
For more advice on your rights and responsibilities, do not hesitate to contact solicitors with expertise in building regulation, contract advice and dispute resolution.