Due to the nature of the building industry, contractors are consistently faced with the risk of delayed or non-payment for work that has been completed. The Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) was introduced to alleviate this problem.
The SOP Act provides a regime where a person who has carried out construction work, or has supplied goods or services related to construction work, is entitled to issue progress payments and provides a quick and cost effective mechanism to resolve any disputes without having to go to Court.
When can a payment claim be served?
The construction contract generally identifies when a payment claim can be made. These timeframes must be strictly complied with or the payment claim may be deemed invalid.
If the contract is silent on when a payment claim can be made, or there is no contract, the SOP Act permits one payment claim to be made per calendar month.
What must a payment claim include?
The SOP Act provides certain requirements needed to make the payment claim valid. The payment claim must:
- identify the person that is liable to make the payment (Respondent);
- identify the construction work (or related goods and services) to which the progress payment relates;
- indicate the amount that is claimed to be due;
- state it is made under the SOP Act; and
- if served by a head contractor. Include a ‘supporting statement' in the form prescribed by the SOP Act.
The SOP Act requires the Respondent to serve a payment schedule to be served within 10 business days of receipt of the payment claim. The payment schedule should identify what is proposed to be paid and what amount (if any) is to be withheld, including the reasons for doing so.
The scheduled amount (or the full amount of the payment claim if no payment schedule has been served) must then be paid with 15 business days for a head contractor or 30 business days for subcontractors.
If the payment schedule is disputed, the matter can be referred to adjudication. Any adjudication application must be made within 10 business days of receiving the payment schedule.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.