A subcontractor’s charge is a way for subcontractors to secure payment of amounts owed to them under an eligible contract by someone who is higher in the contractual chain (e.g. the principal).  Essentially, it allows the subcontractor to bypass the contractor they were engaged by and instead put the principal or even the landowner of a project on notice for payment.

The process of issuing a subcontractor’s charge is complex and governed by Chapter 4 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIFA). A subcontractor who is considering lodging a subcontractor’s charge should seek legal advice, and bear in mind that lodging a subcontractor’s charge will prevent the subcontractor from being able to access the adjudication process to resolve any payment dispute.

The first step in securing a subcontractor’s charge is to prepare and serve a valid notice of claim on the person/entity above the contractor in the contractual chain. The notice of claim must also be given to the contractor itself. The purpose of the notice is to notify a principal or security holder that a subcontractor has not been paid for work performed on a project at the request of a contractor, so that money can be retained by the principal or security holder pending determination of any liability by the contractor to pay that amount to the subcontractor.

Subsequently, you may enforce the subcontractor’s charge by commencing proceedings against the recipient in a Court of competent jurisdiction.

Subcontractors should note that defects in, among other things, the payment/progress claim, payment schedule and/or details comprising the notice of claim (e.g. description of works) may affect your ability to secure a charge over amounts owing under the contract. Accordingly, it is important that you seek legal advice before lodging a notice of claim.

Finally, it should also be noted that strict time limitations apply under the BIFA to issue a subcontractors’ charge and initiate court proceedings to ensure that the charge is not extinguished.  It is vital that subcontractors get on the front foot and speak with an experienced construction lawyer.