Getting paid in the construction industry can be a major challenge for contractors, suppliers or consultants.
If you are a party to a building contract that is covered by the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) and are:
- having difficulty receiving payment; or
- dealing with a party that refuses to pay you altogether,
you can make a payment claim or apply for adjudication in order to receive payment.
Is the building contract covered by the Act?
In order for a building contract to be covered by the Act, it must relate to either construction work (section 5) or supply of goods or services for construction work (section 6) in New South Wales.
Note: Construction work and services can be claimed even if the contract is verbal, does not include progress payment or only requires payment on completion of the work.
If the building contract relates to construction work or related goods and services as defined in the Act, you will be entitled to make a payment claim or apply for adjudication.
How do you make a payment claim?
In order to make a payment claim you must first determine:
- the dates on which you can claim payment as per the contract (Reference Date); and
- how much time has passed since the construction work was carried out (or the related goods and services were last supplied).
This is important as you can only make a payment claim:
- on or after each Reference Date (or where there is no Reference Date, the last day of each month); and
- for amounts owed to you for construction work carried out (or the related goods and services supplied) in the last 12 months.
If you are able to make a payment claim, you can do so by serving it on the person liable to pay you (Respondent) on or after each Reference Date.
The payment claims must:
- identify the construction work that was carried out (or related goods and services that have been supplied) to which the payment relates;
- indicate the amount of the payment that you are claiming is due; and
- include the following statement: “This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 NSW“;
- be accompanied with a ‘supporting statement’ where you are a head contractor.
A ‘supporting statement’ is a statement that includes a declaration to the effect that all subcontractors (if any) have been paid all amounts that have become due and payable in relation to the construction work.
When should you receive payment?
After you make a payment claim, the date on which you should receive payment will depend on who makes the claim. Unless stated in the contract, the due date for payment is:
- 15 business days after the claim is made for a head contractor, claiming from the principal;
- 20 business days after the claim is made for a subcontractor under a construction contract (other than an exempt residential construction contract); and
- 10 business days after the claim is made for a subcontractor under an exempt residential construction contract.
Note: A building contract may specify earlier payment due dates than those stated above, in which case the earlier dates will apply.
How long do you have to wait for a response?
Before paying you, a Respondent can reply to your claim by providing you with a ‘payment schedule’ within 10 business days of receiving the payment claim.
A ‘payment schedule’ is a written statement which sets out:
- the payment claim to which it relates;
- the amount the Respondent proposed to pay; and
- the reasons for not paying the entire claim.
If the Respondent does not serve you with a payment schedule within 10 business days of your claim, they will be liable to pay the total amount set out in your claim.
What if you get no response?
If you:
- have not received a payment schedule from the Respondent within 10 business days of you making the claim; and
- the Respondent does not pay you by the due date,
you can either take court action or apply for adjudication to recover the money due to you.
Read our insight on ‘How an adjudication application can get you paid‘ for more information.
What if you disagree with a payment schedule?
If you receive a payment schedule that you disagree with, you may apply for adjudication within 10 business days of receiving the payment schedule.
Read our insight on ‘How an adjudication application can get you paid‘ for more information.
What if you agree with a payment schedule but haven’t been paid?
If you:
- receive a payment schedule from the Respondent that you agree with; and
- have not been paid the amount set out in the payment schedule by the due date,
you may apply for adjudication within 20 business days of the due date.
Read our insight on ‘How an adjudication application can get you paid‘ for more information.
Can you suspend work?
If the Respondent fails to pay:
- the whole amount claimed by the due date for payment (where no payment schedule was served); or
- the scheduled amount by the due date for payment (as indicated in a payment schedule provided within the set timeframe),
you are entitled to serve notice on the Respondent of your intention to suspend carrying out construction work (or supplying related goods and services) under the contract. This notice must state that you are giving the notice under the Act.
You may then suspend work 2 business days after the notice has been given to the Respondent.
However, you must resume work within 3 business days of receiving full payment from the Respondent.
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