Hong Kong Introduces New Construction Payment Laws

Hong Kong Introduces New Construction Payment Laws

Hong Kong is set to overhaul its construction industry payment practices with the introduction of new security of payment (SoP) legislation. The Construction Industry Security of Payment Bill, modeled after UK law, was published on May 16, 2024, and is currently making its way through the legislative process.

Key features of the new law include:

• Broader Coverage: The law will apply to most public and private construction contracts valued over HK$5 million for construction work and HK$0.5 million for materials and services.
• Fair Payment Terms: Unfair payment practices, such as 'pay when paid' clauses, will be banned. Contractors will have specific timeframes to respond to and pay payment claims.
• Speedy Dispute Resolution: A new adjudication process will allow disputes to be resolved quickly through an independent adjudicator.

While the law is a significant step forward for the industry, it’s important to note that it does not apply to residential buildings or minor works on non-residential buildings. Additionally, the specific procedures for adjudications will be determined by nominating bodies rather than by statute.

The bill is expected to have a substantial impact on the construction industry once enacted.