Building and construction projects typically last many weeks, months or sometimes years and can involve a variety of parties including:
- 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 don’t 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.
Building and Construction Industry Security of Payment Act 1999 (NSW)
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.
If these amounts 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 what the amount of a progress payment will be.
Although there are statutory protections that mean you can require progress payments and stop work if you don’t 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.
You can also include supporting evidence that backs your claim.
You must submit a payment claim within 12 months of the date the money was due. If you have already served a payment claim for one item of work you cannot serve another. However, you can include this work in a subsequent claim for other tasks if numerous payments are outstanding.
You cannot serve this payment claim for all construction contracts. For example, if you’re the head contractor and the project is a residential home that 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.
2. Send the Payment Claim to the Party That Owes You Money
Once you have written your payment claim, you will need to send it to the party that owes you money. If your contract states a date for this to occur, you need to 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 (e.g. by 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, including:
- If you are the head contractor on a project and the client owes you money they have 15 days to respond;
- If you are the subcontractor on a non-residential project, the head contractor will have 30 business days to respond.
A party has ten business days to inform you if they don’t intend to pay the whole amount stated in your payment claim. They must then provide a payment schedule that outlines the amount that they will pay and their reasons for not making full payment. If you do not receive this notice in time, then the other party is required to settle the amount in full.
4. Apply for Adjudication or a Court Order If No Payment Was Received
Haven’t been paid? Haven’t received a payment schedule? Did the party fail to comply with their payment plan? You can apply for adjudication if a payment schedule was supplied but not complied with, or request a court order to have the party make payment.
Construction and building works involves 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.
If you require further assistance in making a payment claim or have any questions about the process, get in touch with our building and construction lawyers today on 1300 544 755.