How to Make a Payment Claim for Non-Residential Construction

In Short

• The Security of Payment Act ensures contractors and suppliers are paid on time during construction projects.
• You can serve a payment claim if payments are delayed, even with a verbal contract.
• Strict timelines apply for lodging claims or escalating disputes through adjudication or court action.

Tips for Businesses

Keep detailed records of your work and payments. Serve payment claims correctly and within the timeframes set by the Act. If payments are delayed, act promptly to escalate the issue using adjudication or legal options. A clear understanding of your rights under the Act can protect your business’s cash flow.

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Table of Contents

• Laws Governing Payment Claims
• Making a Payment Claim for Non-Residential Construction Work
• Key Takeaways
• Frequently Asked Questions

Building and construction projects typically last many weeks, months or sometimes years and can involve a variety of parties, including:

• the head contractor,
• subcontractors, and
• suppliers of materials, equipment or specialist consultants.

Throughout the life of the construction project, these parties need to be paid. But what can you do if contractors or clients do not pay on time? This article will briefly explore the legislation surrounding payment claims for non-residential construction work and the steps involved in serving a payment claim to the party that has delayed payment.

Laws Governing Payment Claims

In recognition of the length and cost of some construction projects, there is legislation that was enacted to specifically protect construction businesses from clients and contractors who do not pay on time. The Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) provides this protection by requiring the client or contractor to make progress payments throughout the life of the project. The Act aims to ensure that any person who carries out construction work or supplies related goods and services under a construction contract is entitled to receive progress payments. 

If progress payments go unpaid, the legislation allows the affected party to serve a payment claim on the party delaying the payment. If this claim goes unanswered or unpaid, then you can:

• apply for adjudication (if the amount of the progress payment is in dispute);
• apply to the court to order the delaying party to make the payment; or
• suspend your work on the project (after providing additional notice to the party)

These protections apply regardless of whether you:

• enter into a verbal or written agreement;
• state that you do not intend to claim progress payments; or
• do not determine the amount of a progress payment.

Although statutory protections mean you can require progress payments and stop work if you do not receive them, some payments may be outstanding once you have completed a project. The steps involved in making a payment claim for non-residential construction work will be discussed below.

Making a Payment Claim for Non-Residential Construction Work

1. Prepare a Written Claim

You will need to prepare a written payment claim that outlines:

• the exact amount owing; and
• a description of the construction services or goods that you provided.

Additonally, you can include supporting evidence that backs your claim.

You must submit a payment claim within 12 months of the money’s due date. If you have already served a payment claim for one work item, you cannot then serve another. However, if numerous payments are outstanding, you can include this work in a subsequent claim for other tasks.

You cannot serve this payment claim for all construction contracts. For example, if you are the head contractor and the project is a residential home the owner intends to occupy once completed, you are not permitted to serve a payment claim. However, if you are a subcontractor claiming payment from the head contractor, and the construction contract states the project is an “exempt residential construction contract”, you can make a payment claim on the condition you state that you are making a payment claim under the Act.

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2. Send the Payment Claim to the Party That Owes You Money

Once you have written your payment claim, you must send it to the party that owes you money. If your contract states a date for this to occur, you must serve it on that date. Otherwise, the default date is the last day of the calendar month. You can serve the party who owes you money by delivering the document to them by post, in person, fax or another way specified in your contract, such as email.

3. Wait for the Party That Owes You Money to Respond

The party that owes you money will have a period to respond to the payment claim. This period will vary depending on the person you are making the claim against. For example, if you are the:

• head contractor on a project and the client owes you money, they have 15 days to respond; or
• subcontractor on a non-residential project, the head contractor will have 20 business days to respond.

A party has ten business days to inform you if they do not intend to pay the whole amount stated in your payment claim. They must then provide a payment schedule outlining the amount they will pay and their reasons for not making full payment. If you do not receive this notice in time, the other party must settle the amount in full.

4. Apply for Adjudication or a Court Order If No Payment Was Received

If the other party supplies a payment schedule but does not comply with it, you can:

• apply for adjudication; or
• request a court order to have the party make payment.

Strict timelines apply for adjudication applications under section 17 of the Act. For example, if:

• a payment schedule is less than the amount you have claimed, you have 10 business days after receiving the payment schedule to apply for adjudication;
• the respondent fails to pay all or part of the scheduled amount by the due date, you have 20 business days from that date to apply; and
• no payment schedule is provided and no payment is made, you must notify the respondent within 20 business days of the due date, give them 5 business days to provide a payment schedule, and then apply within 10 business days after that period ends.

These timelines are critical, as missing them can result in losing your right to adjudication under the Act.

Key Takeaways

Construction and building works involve many legal relationships with the client, the head contractor and the other parties providing services, supplies or equipment. Projects often involve large sums of money and last for an extended period. So as to enable all the individual players to continue operating their business throughout the life of these projects, there are additional protections for recovering unpaid sums. If another party owes you money, it is important to follow the steps to make a payment claim to recover these amounts.

The Act provides a powerful tool for ensuring timely payments in the construction industry. However, it is crucial to understand the process and your rights under the Act. Important strategies for maintaining healthy cash flow in your construction business include:

• keeping detailed records;
• serving payment claims correctly; and
• being prepared to escalate matters through adjudication or court action when necessary.

If you are making a payment claim, our experienced building and construction lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions