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Builders protected under the Security of Payment Act | Contracts Specialist

Payment Claim under
Building Construction Industry Act

Sick of having late payments, partial payments or not getting paid at all?

Know how to create a payment claim and what rights are covered under the Building Construction Industry Act—more known as the Security of Payment Act.

Table of Contents

What is the Building Construction Industry Act?

If you are a builder, then you are probably curious what a payment claim under the law is all about. 

The Building Construction Industry Act is also called the Security of Payment Act. This legislation entitles builders, contractors, subcontractors, and suppliers to claim for construction work and related goods and services provided. This legal entitlement also brings responsibility to the part of the owner or client to give builders or contractors progress payments. Otherwise, they may lodge an adjudication or commence legal proceedings to recover debts.

What is a Payment Claim under the Act?

A payment claim is a document containing the breakdown of all the work done for the building project. This is a legal entitlement to builders, contractors, subcontractors, and suppliers which enables them to demand and receive progress payments. In addition, if they experience delays or non-issuance of these progress payments, they have the right to apply for adjudication or commence legal proceedings against their client.

When can Builders Claim the Payments?

A payment claim can be served in four (4) different events or ways. It can be for every:

  • Reference date
  • Milestone
  • Event
  • At the end of the month

A reference date is agreed upon by both contractor and client. The contractor may issue a payment claim on or after the reference date, provided that the reference date has not been used in previous payment claims.

A contractor and client may agree to issue payment claims for every work for every milestone. A milestone pertains to every work completed or accomplished. This can be an effective approach to payment as the client sees and is able to monitor the progress of the building project.

When pertaining to an event, it means that it is dependent on the agreement of the contractor and the client. It could be an event stated on the contract saying that the builder can serve a payment claim after a specific period (e.g. Defects Liability Period). This can be quite confusing, but the bottom line is, it highly depends on the construction contract.

The Security of Payment Act states that if there is no reference date stipulated in the building or construction contract to which the builder can serve a payment claim, then it is implied that the reference date is the end of the month. However, this practice is not advisable since it is still better to indicate a clear date on the construction contract to make sure that payment claims and payments are rightfully served.

What are the benefits of builders under the Act?

These benefits may also be considered as rights that are covered under the Building Construction Industry Act. If a client refuses to pay the builder or proposes to pay less than the claimed amount, then the builder has the right to:

  • Suspend carrying out works or supplying related goods and services
  • Recover debt through adjudication or court action

NOTE: One of the benefits of the Building Construction Industry Act is that builders get to enjoy their right to receive progress payments.

Why is serving a Payment Claim under the Act important?

This gives the builders, contractors, subcontractors, and suppliers the legal right to demand payment. Payment issues are common in the building and construction industry. And for cities like Sydney where the construction industry is in its prime and let alone, expensive, building disputes like payment disputes are really bound to happen. So it is just reasonable to have a process and legislation where the rights of construction service providers are protected.

How can Contracts Specialist help?

Contracts Specialist is a Sydney-based construction law firm offering services to homeowners, builders, and contractors. We deal with matters related to Building Disputes, Construction Contracts, Debt Recovery, and Strata Issues.

We are headed by our principal lawyer, John Dela Cruz, with over 10 years of experience and specialisation in construction law. With John, you can be confident that you will be guided throughout your legal situation.

With vast knowledge and expertise on all facets of building and construction, you are ensured that you are in good hands.

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