Homeowners Must Pay Contractors Within Fifteen Days of Payment Claim
The Building and Construction Industry Security of Payment Act 1999
The Building and Construction Industry Security of Payment Act 1999 provides protection to builders in the case that homeowners are unable to make payment to contractors following a payment claim. This can happen when banks take longer than expected to deliver on home loan capital, if the loan is rejected at a later stage of the application or for other reasons. The law states that “Payment must (sic) be made by a principal to a head contractor under a construction contract… on—
(a) the date occurring 15 business days after a payment claim is made…
(b) an earlier date as provided in accordance with the terms of the contract.”
Similar protections apply to subcontractors who have been employed to complete specialist work during the construction of a home. In these cases, the law states that:
Payment is (sic) to be made to a subcontractor under a construction… on—
(a) the date occurring 20 business days after a payment claim is made…
(b) an earlier date as provided in accordance with the terms of the contract.
Liabilities of Not Making Payment Claim
The consequences of not paying contractors or subcontractors within the specified period include:
- Contractors or subcontractors serving a notice to suspend building activities.
- Contractors or subcontractors recovering the unpaid debt in a court of competent jurisdiction.
- Contractors or subcontractors making an adjudication application.
Payment Schedules for Payment Claims
Payment schedules may be arranged at the time of payment claim, however the respondent must arrange a payment schedule in writing ten days after the claim is made. If the payment schedule is not honoured, the claimant has the right to enact the same consequences as listed above in the bullet points.
Adjudication for Unpaid Payment Claims
If the claimant requires adjudication due to an unpaid or partially-paid claim for construction services, the defendant may not make any cross-claim against the claimant or raise any defence in relation to matters arising under the construction contract, unless the defendant has:
- Not been served a payment claim.
- Made payment on the whole part of the scheduled amount on or before the due date.
Intent to seek adjudication must be served in writing to the defendant within 20 days of the payment due date. The defendant then has an additional five days to make the payment following receivership of notice.
An adjudicator will decide the amount that is payable on a payment claim, as well as any interest, and the due date of the payment to be made. Any decision must be communicated in writing to both parties. If payment is not received by the date defined on a certificate of adjudication, interest may accrue and other civil penalties may be imposed, including: seizure and sale of property, redirection of debts, redirection of earnings, payment of money by instalments or changing orders (equity handover).
If you are seeking advice due to unpaid construction payment claims, contact Richard Jones at Sydney Building Defects Reports and Inspections. SBDIR is open for business Monday to Friday 8:30am to 5:00pm. Simply call 0419416040 to have your dispute looked at by professionals.