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Impact of Security of Payment Act Changes
on Clause 17 Progress Payment
Understanding how recent SOPA amendments affect your progress payment rights under the NSW HIA Lump Sum Contract.
You can be confident that you are getting the right legal advice.
Navigating progress payments can be complicated for homeowners building their dream home. This article explains the legal requirements and contractual obligations, including recent changes to the Building and Construction Industry Security of Payment Act 1999 (NSW), and their impact on Clause 17 of the NSW HIA Lump Sum Contract. We provide a guide to help homeowners understand the terminology of progress claims, their legal rights, and options for resolving disputes.
Get a Fixed-Fee Quote NowUnderstanding Progress Claims
and Payment Schedules
Before discussing the impact of changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) on Clause 17 Progress Payment of the NSW HIA Lump Sum Contract, it is important to first understand the basics of progress claims and payment schedules.
What is a Progress Claim?
A progress claim is a request for payment for work done to date or for goods and materials supplied for a construction project. Under the Security of Payment Act, a progress claim must be made in accordance with the contract.
What is a Payment Schedule?
A payment schedule is your response to a progress claim, indicating the amount you propose to pay or the reason for withholding payment. You must respond within 10 business days if not specified in the contract.
Legal Framework
Progress claims and payment schedules are governed both by your HIA building contract and the Security of Payment Act. Both must be complied with to protect your rights.
Progress Claim
Request for payment for work completed or materials supplied under the contract.
Payment Schedule
Your response stating amount to pay and reasons for withholding. Must respond within 10 business days.
Legal Framework
Governed by your HIA contract and Security of Payment Act requirements.
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Difference Between Progress Claims
and Payment Claims
Understanding the distinction between progress claims and payment claims is essential for knowing your rights and obligations under NSW construction law.
Progress Claim
A progress claim is a request for payment made under the terms of your building contract.
Key Features:
- Made under contract provisions (e.g. Clause 17 of HIA Contract)
- Follows payment schedule in the contract
- Based on work completed to date
- May or may not reference Security of Payment Act
Payment Claim
A payment claim is a formal claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW).
Key Features:
- Made specifically under the Security of Payment Act
- Must meet strict requirements and timelines
- Triggers statutory payment and adjudication rights
- Requires payment schedule response within timeframe
Progress Claim
Made under contract terms (Clause 17). Follows contract payment schedule. May not reference SOPA.
Payment Claim
Made under Security of Payment Act. Strict requirements. Triggers statutory rights and adjudication.
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Critical Point: Both Types of Claims Matter
It's essential to understand the distinction between the two because even if a progress claim doesn't specifically reference the Security of Payment Act, the Act may still apply to your contract. If the Act applies, you must comply with its requirements when responding to any progress claim, regardless of how the builder labels it.
Clause 17 of the NSW HIA
Lump Sum Contract
Clause 17 regulates progress payments and establishes the procedures for claiming and making payments throughout the construction period.
Key Requirements Under Clause 17
- Builder must give you a written claim for progress payment at completion of each stage
- Progress claim must state amounts for stage completion, price adjustments, and variations
- You must pay within 5 working days of receiving the builder's claim
- Claim must provide sufficient detail to justify the payment amount requested
Builder's Right to Suspend Work
The builder can suspend work if payment is not made in accordance with the contract. This is an important protection allowing them to stop work without breaching the contract when payments are not received.
Warning for Homeowners
Failing to make payments on time can result in work stoppage, which may delay your project and potentially increase costs. Always ensure you understand your payment obligations and timeframes.
Understanding Your Payment Obligations
It is critical for homeowners to understand Clause 17, as it sets out your payment obligations and the builder's entitlement to payment.
When Disputes Arise
Any dispute regarding progress payments can be referred to an adjudicator under the Security of Payment Act
Critical Interaction
The interaction between Clause 17 and SOPA is critical to understanding your rights when making progress payments
Key Requirements
- Written claim for each stage
- Pay within 5 working days
- Must include all amounts owed
Suspension Rights
Builder can suspend work if payment not made. This may delay project and increase costs.
Warning: Always make payments on time to avoid suspension.
Your Obligations
Understand your payment obligations and builder's entitlement to payment under Clause 17.
Disputes can be referred to adjudicator under SOPA.
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What to Do When You Receive a Progress Claim
Without Reference to the Security of Payment Act
Many homeowners receive progress claims that don't mention the Security of Payment Act. This doesn't mean the Act doesn't apply. Here's what you need to know and do.
Critical Understanding
Even if a progress claim does not specifically mention the Building and Construction Industry Security of Payment Act 1999 (NSW), the Act may still apply to your contract. If the Act applies, you must comply with its requirements when responding to the progress claim.
Step-by-Step Response Guide
1
Review Your Contract Carefully
Examine Clause 17 of your NSW HIA Lump Sum Contract. Determine what the payment schedule requires and whether the builder has followed the contractual procedures.
Check: Has the builder claimed for the correct stage? Is the amount claimed in accordance with Schedule 1? Has the required work been completed?
2
Determine if Builder Followed the Schedule
If the builder has not followed the payment schedule in your contract, you may be entitled to withhold payment until the builder rectifies the breach.
Important: You must still respond with a payment schedule stating your position and reasons for withholding payment. Do not simply ignore the claim.
3
Seek Legal Advice Promptly
If you believe the builder is not entitled to payment, or if you're unsure about your rights and obligations, seek legal advice immediately. Time limits under the Security of Payment Act are strict.
Why it matters: Missing deadlines can result in liability for the full claimed amount, even if you have legitimate grounds to withhold payment.
A construction lawyer can review the claim, assess compliance with contract and Act requirements, and advise on proper response.
4
Issue a Payment Schedule
Even if disputing the claim, you must provide a payment schedule outlining what you believe is payable and your reasons for withholding any amount.
Essential elements: The payment schedule must clearly state the amount you propose to pay (which can be zero) and provide specific reasons for any amount you're withholding. This should be done carefully and ideally with legal advice.
5
Consider Dispute Resolution
If the builder continues to demand payment and you believe you have grounds to withhold, you may need to initiate dispute resolution procedures under your contract or consider legal action.
Options include: Adjudication under the Security of Payment Act, NCAT proceedings for building disputes, or negotiated settlement with legal assistance.
Common Mistakes to Avoid
Ignoring the Claim
Never simply ignore a progress claim. This can result in automatic liability for the full amount.
Missing Deadlines
Failing to respond within required timeframes (5 working days under Clause 17, or timeframes under SOPA).
Informal Responses
Responding informally via email or phone instead of providing proper payment schedule.
Vague Reasons
Providing vague or general reasons for withholding payment instead of specific, detailed grounds.
Act Still Applies
Even without SOPA reference, the Act may still apply. You must comply with its requirements.
1
Review Contract
Check Clause 17 requirements, payment schedule, and whether builder followed procedures.
2
Check Compliance
Determine if builder followed payment schedule. You may withhold if they didn't, but must provide payment schedule.
3
Get Legal Advice
Seek prompt legal advice if unsure. Missing deadlines can result in liability for full amount.
4
Issue Payment Schedule
Provide payment schedule stating amount and specific reasons for withholding. Do this carefully with legal advice.
5
Consider Dispute Resolution
If dispute continues, consider adjudication, NCAT, or negotiated settlement.
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2019 Security of Payment Act
Amendments
Significant changes were made in 2019 affecting progress claims and payment schedules under HIA contracts.
Maximum Payment Terms
20 Business Days
Maximum Payment Term
One of the key changes is the introduction of a maximum payment term for progress payments. Payment terms in construction contracts cannot exceed this maximum period, providing clarity about when payment is due.
Supporting Statement Requirements
New rules for supporting statements that must accompany payment claims for contracts above certain monetary thresholds.
- Authorised person declaration required
- Work performed verification
- Better protection from fraudulent claims
Increased Penalties
The amendments increased penalties for non-compliance with the Act:
Failing to Provide Payment Schedules
Significant financial penalties apply
Non-Compliant Payment Claims
Claims not meeting Act requirements face penalties
Retention Money Provisions
New provisions regarding retention money:
Trust Requirements
Retention money must be held in trust
Limitations on Withholding
Specific rules about when retention can be withheld
Maximum Payment Terms
20 Days
Maximum payment term for progress payments from when claim is made.
Supporting Statements
New requirements for payment claims above thresholds. Authorised person declaration and work verification required.
Increased Penalties
Significant penalties for failing to provide payment schedules or non-compliant claims.
Retention Money
Must be held in trust with specific rules about when it can be withheld.
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Payment Schedule in
Your HIA Contract
The payment schedule in your HIA contract sets out when progress payments are due. Understanding this schedule is critical for managing your cash flow and protecting your rights.
Understanding Your Payment Schedule
The payment schedule in your HIA Lump Sum Contract is typically set out in Schedule 1. This schedule must comply with the Security of Payment Act, including the maximum 20 business day payment term introduced in 2019.
Your contract's payment schedule should detail the stages of work, the amount payable at each stage, what work must be completed before payment is due, and ensure payment terms don't exceed the statutory maximum.
Reviewing Your Payment Schedule
Before signing an HIA contract, carefully review the payment schedule to ensure:
- When each progress payment is due
- How much is payable at each stage
- What work must be completed before payment
- Payment terms don't exceed 20 business days
Getting Legal Advice on Your Contract
Strongly recommended before signing an HIA contract to ensure your rights are protected:
Review
Payment schedule review
Explain
Your obligations explained
Identify
Potential issues identified
Payment Schedules
HIA contract payment provisions must comply with SOPA including 20-day maximum payment term.
Review Your Schedule
Check when payments due, amounts payable, required work completion, and payment term compliance.
Get Legal Advice
Have lawyer review schedule, explain obligations, identify issues before signing.
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How Are Progress Payments
Calculated?
Understanding how progress payments are calculated helps you verify that claims from your builder are accurate and comply with your contract.
Calculation Basis
Progress payments are calculated based on several factors:
Work Completed
The amount of work the builder has actually completed as specified in the contract payment schedule.
Materials and Expenses
The cost of materials used and other expenses incurred in completing the work to date.
Contract Price Adjustments
Any approved variations or adjustments to the contract price that have been agreed.
Less Previous Payments
The total amount is reduced by any amounts you've already paid under previous progress claims.
Typical Payment Schedule Structure
Most HIA Lump Sum Contracts use a staged payment schedule. The amount of each progress payment is typically determined by the percentage of the contract price allocated to each stage.
Example Payment Stages:
Deposit
5-10%
Base Stage
15-20%
Frame Stage
15-20%
Lock-up Stage
20-25%
Fixing Stage
15-20%
Practical Completion
10-15%
Note: Percentages vary between contracts. Always check Schedule 1 of your specific contract.
Verifying Progress Claims
When you receive a progress claim, you should carefully review the documentation to ensure:
Work is Actually Complete
The builder has completed the work required for that stage as specified in Schedule 1 of your contract.
Amount is Accurate
The claimed amount matches the percentage or amount specified in the payment schedule for that stage.
Variations are Approved
Any variations included in the claim have been properly approved in writing before the work was done.
Documentation Provided
The builder has provided an invoice or progress claim that clearly outlines the work completed, materials used, and any other expenses.
When to Seek Legal Advice
You should seek legal advice if:
• The progress claim appears inaccurate or doesn't match the contract
• You have concerns about the quality or completion of work
• There are disputes about variations or additional costs
• You're considering withholding all or part of a payment
Calculation Basis
Based on work completed, materials & expenses, contract adjustments, less previous payments.
Payment Stages
Deposit, base, frame, lock-up, fixing, practical completion. Check Schedule 1 for your specific percentages.
Verify Claims
Check work complete, amount accurate, variations approved, documentation provided.
Get Legal Advice
If claim seems inaccurate, work quality concerns, variation disputes, or considering withholding payment.
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Final Progress Claim
and Payment
The final progress claim is the last payment before you take possession of the property. Careful attention to detail is essential at this stage.
Before Making the Final Payment
Essential checks before releasing final payment:
Work Completion
- All work completed satisfactorily
- No outstanding defects or issues
- Practical completion certificate issued
Documentation
- Occupation certificate received
- Insurance documents provided
- Warranties and manuals handed over
Financial Verification
- Final claim reflects contract sum
- All variations properly documented
- Previous payments correctly deducted
Retention Money
- Retention amount held if applicable
- Defects period clearly understood
- Release conditions documented
Understanding Retention Money
Retention money (typically 5-10% of the contract price) is an amount withheld as security to ensure the builder rectifies any defects that emerge during the defects liability period.
Key Points About Retention:
- Under 2019 amendments, retention money must be held in trust
- Released after defects period expires and defects rectified
- Provides financial security for rectification work
- Contract should specify retention amount and release conditions
What to Do if Issues Arise
If there are disputes or disagreements about the final progress claim:
Document Everything
Keep detailed records of all defects, incomplete work, or issues. Take photos and notes.
Seek Legal Advice Immediately
Get expert advice on your rights and options. A construction lawyer can review the final claim and assess your position.
Don't Release Final Payment Prematurely
If builder hasn't complied with contractual obligations or Security of Payment Act, you may have right to withhold payment until issues are rectified.
Before Final Payment
Check work completion, documentation, financial accuracy, retention arrangements.
Retention Money
5-10% withheld as security. Must be held in trust. Released after defects period.
If Issues Arise
Document everything, seek legal advice, don't release payment prematurely.
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Common Mistakes Homeowners Make
with Progress Claims
Avoiding these common mistakes can protect your legal rights and financial interests throughout your building project.
Not Responding to Progress Claims
Failing to provide a payment schedule within required timeframes can result in automatic liability for the full claimed amount, even if you have legitimate grounds to withhold payment.
Paying Without Verification
Making progress payments without properly verifying that the work has been completed to the standard required or matches the claimed stage in your contract.
Not Getting Legal Advice
Attempting to handle complex payment disputes without professional legal guidance. Construction law and Security of Payment procedures are technical and missing deadlines can have serious consequences.
Assuming Act Doesn't Apply
Believing that because a progress claim doesn't mention the Security of Payment Act, the Act doesn't apply. The Act may still govern your obligations even without explicit reference.
Informal Communication
Responding to payment claims informally via email or phone conversation instead of providing a proper written payment schedule that complies with legislative requirements.
Not Keeping Records
Failing to maintain proper records of all payment claims, payment schedules, and payments made. Good record-keeping is essential for resolving disputes.
Releasing Final Payment Too Soon
Making the final payment before all work is completed, all defects are rectified, and all required documentation (occupation certificate, insurance, warranties) is provided.
Ignoring Payment Terms
Failing to comply with your own payment obligations while properly exercising your rights. Even when disputing claims, follow proper procedures.
Not Responding
Always respond with payment schedule within timeframes to avoid automatic liability.
Paying Without Verification
Verify work completion before making payment. Check against contract requirements.
No Legal Advice
Get professional guidance for payment disputes. Missing deadlines has serious consequences.
Assuming Act Doesn't Apply
SOPA may apply even without explicit reference. Don't assume it doesn't govern your situation.
Informal Communication
Provide proper written payment schedule, not informal email or phone responses.
Not Keeping Records
Maintain proper records of all payment claims, schedules, and payments made.
Final Payment Too Soon
Wait until all work complete, defects fixed, documentation provided before final payment.
Ignoring Payment Terms
Always comply with payment obligations while properly exercising your rights.
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Understanding the interaction between Clause 17 of the HIA Lump Sum Contract and the Security of Payment Act can be complex, particularly with the 2019 amendments affecting payment terms, supporting statements, and retention money. If you're facing a progress payment dispute, unsure about your obligations under your HIA contract, or need advice on responding to a payment claim, John Dela Cruz can provide clear guidance on your rights and practical options for resolving the matter. With over 17 years focusing exclusively on construction law, John helps homeowners navigate payment disputes and contractual obligations efficiently.
Why Choose Contracts Specialist
John Dela CruzPrincipal Lawyer, Contracts Specialist
When you work with Contracts Specialist, you receive legal advice directly from John Dela Cruz — Principal Lawyer with over 17 years of exclusive construction law experience.
John is an Australian Legal Practitioner and he services NSW, Queensland, Victoria, and Tasmania. He has dedicated his entire legal career to specialise in construction law. As a former Divisional President of the Master Builders Association NSW, he combines deep legal expertise with comprehensive industry knowledge. He maintains daily experience in building dispute tribunals (NCAT, VCAT, QCAT) and courts across multiple jurisdictions.
Unlike generalist lawyers who handle various legal matters, John specialises exclusively in construction law matters affecting homeowners, builders, contractors, and subcontractors. You receive focused expertise from a lawyer who understands both the legal framework and the practical realities of the building industry.
How to Get Started
1
Submit Your Contract
Submit your building contract and basic details through our secure online form. Upload your contract for review - no consultation required.
2
Confirmation & Interest Check
You'll receive an immediate confirmation email asking if you'd like to proceed with the review. We'll confirm receipt of your contract and ask you to confirm you want to proceed.
3
Fixed-Fee Cost Disclosure
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4
Accept & Receive Review
Accept the cost disclosure, secure payment, and receive your expert contract review via email within 2 business days. Once you accept and pay, your detailed contract review is delivered within 2 business days.
Get Expert Advice on Progress Payment Disputes
Whether you're dealing with a progress payment dispute under your HIA contract, need advice on responding to a payment claim, or want your contract reviewed before signing, complete the form below for your fixed-fee quote.
Frequently Asked Questions
What happens if I don't respond to a progress claim with a payment schedule?
If you receive a payment claim under the Security of Payment Act and fail to provide a payment schedule within the required timeframe, you become liable to pay the full claimed amount. This applies even if you dispute the claim. The builder can then commence debt recovery proceedings or seek judgment for the claimed amount. Always provide a payment schedule, even if you're disputing the claim.
How long do I have to pay a progress claim under Clause 17 of the HIA contract?
Under Clause 17 of the NSW HIA Lump Sum Contract, you must pay a progress claim within 5 working days of the builder giving the claim. However, this payment term is also subject to the Security of Payment Act, which allows for maximum payment terms of 20 business days. Your contract payment timeframe applies but cannot exceed the statutory maximum.
Can I withhold payment if I'm not satisfied with the builder's work?
Yes, you can withhold payment for legitimate reasons, but you must follow proper procedures. You must provide a payment schedule stating what you propose to pay and your reasons for withholding any amount. You cannot simply refuse to pay or ignore the payment claim. It's highly advisable to seek legal advice before withholding payment to ensure you're following correct procedures.
What are the 2019 changes to the Security of Payment Act?
The 2019 amendments introduced several significant changes including: maximum payment terms of 20 business days, new supporting statement requirements for payment claims above certain thresholds, increased penalties for non-compliance with the Act, and new provisions about retention money including trust requirements and limitations on withholding.
What is retention money and when is it released?
Retention money is typically 5-10% of the contract price withheld as security to ensure the builder rectifies any defects during the defects liability period. Under the 2019 amendments, retention money must be held in trust. It's released after the defects period expires and all defects have been properly rectified according to the contract terms.
Can the builder suspend work if I don't pay a progress claim?
Yes, under Clause 17 of the HIA contract, if a progress payment is not made when due, the builder has the right to suspend work. However, the builder must follow proper procedures and provide appropriate notice before suspending. If you're facing suspension threats, seek legal advice immediately to understand your rights and the builder's obligations.
What's the difference between a progress claim and a payment claim?
A progress claim is a request for payment made under the terms of your building contract (such as Clause 17), while a payment claim is a formal claim made specifically under the Security of Payment Act. The key difference is that a progress claim is made under contract provisions, whereas a payment claim is made under the Act and triggers statutory payment and adjudication rights. However, even if a claim doesn't reference the Security of Payment Act, the Act may still apply to your contract.
Should I get legal advice about progress payment issues?
Yes, it's highly advisable to seek legal advice if you're unsure about your rights, considering withholding payment, or facing a payment dispute. Construction law and Security of Payment procedures are technical, with strict timeframes. A construction lawyer can review the payment claim, assess compliance with contract and Act requirements, prepare a proper payment schedule response, and advise on your rights and options. The consequences of responding incorrectly can be severe, including liability for the full claimed amount.
What if I don't respond?
You become liable to pay the full claimed amount. Builder can commence debt recovery. Always provide a payment schedule.
How long to pay?
5 working days under Clause 17. Maximum 20 business days under SOPA. Your contract timeframe applies but cannot exceed statutory maximum.
Can I withhold payment?
Yes, for legitimate reasons but must provide payment schedule stating reasons. Cannot simply refuse to pay. Seek legal advice first.
2019 changes?
Maximum 20 business day payment terms, supporting statement requirements, increased penalties, new retention money trust provisions.
What is retention?
5-10% withheld as security. Must be held in trust under 2019 amendments. Released after defects period expires and defects rectified.
Can builder suspend?
Yes, under Clause 17 if payment not made. Must follow proper procedures and provide notice. Seek legal advice if facing suspension.
Progress vs payment claim?
Progress claim is under contract terms. Payment claim is under SOPA with statutory rights. Act may still apply even without explicit reference.
Need legal advice?
Highly advisable if unsure or considering withholding payment. Lawyer can review claim, assess compliance, prepare proper schedule. Consequences of responding incorrectly can be severe.
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Related Resources
Explore our comprehensive guides to learn more about your rights and obligations under construction law.
Security of Payment Act NSW
Comprehensive guide to the Security of Payment Act covering payment claims, payment schedules, adjudication processes and your rights under NSW construction law.
Homeowners Guide to the Security of Payment Law
Essential guide for homeowners to understand your rights and obligations under the Security of Payment Act when dealing with progress claims and payment disputes.
Security of Payment Act NSW
Comprehensive guide covering payment claims, schedules, adjudication and your rights.
Homeowners Guide to SOPA
Essential guide for homeowners on rights and obligations under the Security of Payment Act.
→ Swipe to see all resources