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Builders protected under the Security of Payment Act | Contracts Specialist

Payment Claim under
Building Construction Industry Act

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If you are a builder, then you should be aware of the details of a payment claim under the Building Construction Industry Act. You’re probably sick of experiencing late payments, short payments or not getting paid at all. So it’s best to arm yourself with information! Learn how to effectively create a payment claim and understand what rights are covered under the Building Construction Industry Act—more known as the Security of Payment Act.

Contracts Specialist can give you expert legal advice regarding this matter.

Table of Contents

What is the Building Construction Industry Act?

The Building Construction Industry Act is also known as the Security of Payment Act.

This legislation entitles contractors, subcontractors, and suppliers to claim for construction work provided and materials supplied. This legal entitlement also brings responsibility to the part of the owner or client to give builders progress payments. Otherwise, the builder may lodge an adjudication 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. As mentioned earlier, this is a legal entitlement to contractors, subcontractors, and suppliers. This entitlement enables them to receive progress payments. In addition, if they experience delays or non-issuance of these progress payments, they have the right to apply for adjudication.

When can Builders Claim the Payments?

A payment claim can be served in 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. This is the date when a contractor may issue a payment claim. As much as possible, it is best to issue the payment claim on the said date. Not before and definitely not after.

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 bottomline is, it highly depends on the construction contract.

The Security of Payment Act tells that if there is no reference date or any specified date on the building 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 refuses to pay less than the claimed amount, then a builder has the right to:

  • Suspend work
  • Recover debt through adjudication

NOTE: One of the benefits of the Building Construction Industry Act is the right of the builder to receive progress payments.

Why is serving a Payment Claim under the Act important?

This gives the contractors, subcontractors, and suppliers the legal right to demand for 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.

Construction Law Experts can help with issuing a Payment Claim under the Building Construction Industry Act

With Contracts Specialist, you are ensured that you are in good hands.

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