Introduction
This article has been written in response to questions being raised about builders asking for discounts.
The categories are:
- Builders demanding a discount or the next progress claim will not be paid or not paid on time;
- Written demands that refer to assistance in funding advertising and so on with verbal commentary that if the discount to provide the assistance is not provided there will be problems with the next progress payment; and
- Indications of the reductions in price the builder expects on future quotes.
Overview
Items one and two are subject to both good and bad news.
The good news vindicates the anger people are demonstrating over the arrogance and audacity of the demands.
However, the bad news demonstrates that you cannot just feel angry about this and ignore it. There is action you must take before you proceed any further on any project for any builder that has asked for an item one or two type discount.
Failure to do so can result in you having to pay money back to a liquidator in the event of a preferential payment claim.
The good news
There is no right to unilaterally demand a discount on an existing contract.
There should also be no need to ask for a discount on an existing contract.
The reality is that the developer still has to pay the builder the same amount now as they did before COVID 19.
If the developer is experiencing increased risk as a result of current events, that is their problem.
The reality is that the amount you have to pay your suppliers and workers is not going to magically drop by the amount of the discount being asked for.
If they want to be foolish about paying their bills you should be comforted by the fact that they are liable for 67P Interest. That is a very generous interest rate at 10% plus the 90 day bank bill rate compounded daily.
The calculation is a dog but we have an app for that which makes life easy.
The bad news
The demands for a discount, even the item two demands without the verbal threats, trigger the preferential payment provisions.
It is vital that you read this article on preferential payments.
You are going to have to send a written reply that covers certain technical aspects to cover your backside.
It is not enough to simply say no
or telling them to get stuffed.
Even if you do decide to give the builder the discount, you may still have to pay the money back as a preferential payment.
Dealing with this is not something you can DIY. It has to deal with some very specific issues concerning preferential payments are recent cases in that area.
We can prepare the document for you. Contact us.
Item three
Prices are going to drop but not in such a way that anyone can specify a percentage drop right here and now.
There are also aspects of this that are simply not good business sense.
Full details of the relevant considerations are set out here.
Shaping the environment
There are reforms that have been in the pipeline for a while that need to be expedited and others that need to be brought to light.
Look at the article on project bank accounts and the article on abolishing retention monies>.
While Subcontractors Alliance and Subbies United have been pushing hard and making progress they need help.
Send the links to those articles to your local state member and be loud about your discontent.
If you need help
We do provide help and assistance. Contact us if you are in trouble, need help or are worried.
Related articles
Why are project bank accounts being delayed?