Changes to Singapore security of payment regime in force next month

The Building and Construction Industry Security of Payment Amendment Act and Building and Construction Industry Security of Payment (Amendment) Regulations introduce the most substantial amendments to the Building and Construction Industry Security of Payment Act (SOP Act) since its entry into force in 2005.

The changes bring more construction contracts into the scope of the SOP Act; enhance the way in which payment claims and responses are handled; clarify the status of repeat payment claims; and introduce improvements to the adjudication process.

Construction disputes expert Yong Neng Chan of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law, said: "The upcoming changes are far-reaching – with adjustments to not only security of payment processes but also the types of contracts being brought within the ambit of the regime and the types of claims which can be pursued".

"It is imperative for companies to relook, re-align and refine their internal processes with the changes coming into force, if not already done," he said.

The amendments expand the scope of the SOP Act to cover prefabrication works done overseas for projects in Singapore; as well as prefabrication works carried out in Singapore for export, provided that both contracting parties are Singapore-registered entities. The law has also been clarified to confirm that claims for payment for work done or goods supplied before contract termination are valid, unless the parties have pre-agreed different terms.

A 30-month limitation period has been introduced for service of payment claims. The law has also been clarified to confirm that a payment claim will be valid even if it is served before the date or period specified in the contract, with claims served early treated as if they have been served on the date specified in the contract. Claimants will be allowed to repeat a payment claim even without additional work done or goods or services supplied, as long as this is done within the limitation period and the claim has not yet been adjudicated on.

Changes to the adjudication process include a new entitlement for claimants, in addition to respondents, to apply for an adjudication review. A non-exhaustive list of grounds on which parties can commence proceedings to set aside an adjudication determination, consistent with those that have already been developed by the courts, have also been incorporated into the SOP Act.

Further amendments have been made in order to incorporate various decisions of the Singapore courts into the SOP Act. These include allowing adjudicators to disregard certain administrative requirements provided that the other party was not 'materially prejudiced', and clarifying that belated objections by respondents will be disregarded by adjudicators or the courts unless the respondent can prove that the objection could not have been made known earlier.