How to save yourself from the next Signature Homes debacle

As most tradesmen in the Hawkes Bay are aware Signature Homes Hawkes Bay Ltd went into liquidation recently owing a significant amount of money to unsecured creditors. This case is typical of a number I have come across with subbies being worst hit.

The worst thing is that the subbies could have reduced or even stopped their losses if they had had greater confidence that the rules are in their favour.

So what can be done?

Even though someone like Signature Homes gave the impression that they were solid, it was well known for some time that they were as solid as something flushed (thanks to my plumbing friend for that analogy!). Problem is that a lot of contracts still seemed to be done on a handshake.

This appears to be because people are scared of not securing the job, or future jobs.  Therefore they are willing to do business without presenting their own terms, reading the debtor’s terms, or taking advantage of the Construction Contracts Act 2002 (CCA).

The CCA is interesting in that a majority of subbies I talk to think the CCA is too complicated or has no teeth. There is plenty of case law now which gives good indications of how useful the CCA is. It was written to facilitate speedy payment after all. Sometimes even politicians get things right.

So if the CCA has teeth then just how complicated is it to use? As easy as falling off a log really.  All you need to do is ensure your invoices meet the requirements of the CCA. If you do nothing else put the words “This is a payment claim under the Construction Contracts Act 2002” on all your invoices. There are other issues to consider but I find most subbies do this as part of their normal invoicing.

If you aren’t paid on time do not hesitate to issue a 5 day notice to stop work. You don’t actually have to stop work but it sure makes the head contractor sit up and take your requests for payment on time seriously. If you do stop work no other trade can finish your job unless you approve.

The head contractor is required to either pay you in full on due date, or advise why they haven’t paid your invoice. If they don’t do this then the CCA requires that they pay your invoice in full and then claim back any variations from you.

The CCA takes away the head contractors infamous excuse of “I can’t pay you because I haven’t been paid”. Paid when paid clauses cannot be enforced.

Subbies have been given the Construction Contracts Act to use and just like keeping your tools in top condition (do builders still sharpen saws?) get used to knowing when and how to use it.