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Payment Claim for the Built Industry

How do you protect your rights and recover the money owed to you?

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One of the many sectors affected by the COVID-19 pandemic is the building & construction industry. During this time, CMI Legal has been engaging with clients who are either in arrears or attempting to reclaim money from those in arrears.
 
All workers in the building & construction industry are subject to the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”), which allows contractors doing construction work or providing goods and services relating to construction to recover “progress payment” for work done so far.
 
Step 1: Issuing a Letter of Demand to the Party in Arrears (“Respondent”)
A letter of demand must include all relevant details related to all parties and the building & construction work in which they are involved. For example, the building address, construction period, type of work, amount of money owed by the party in arrears (respondent) and interest to be paid, if any, and due date for payment.
 
Step 2: Issuing a Payment Claim
If the respondent does not pay the money owed by the due date specified in the letter of demand, you may issue a payment claim to that party.
 
A payment claim must be made on the reference date. A reference date may be specified in the original contract* between the parties in dispute (e.g. 11th day of each month) or if unspecified, shall be the last day of the month in which building & construction contract work was carried out and the last day of each month after that.
 
We recommend including a reference date in your contract. For more information on how we can assist you in preparing a contract, please contact us on 02 8336 8592.
 
Upon receiving the payment claim, the respondent must provide a payment schedule within the required number of business days:
  1. 10 days after payment claim is served, if the due date for payment of money has not expired; or
  2. 5 days after receiving notice to apply for adjudication, if due date has expired.
 
The following due dates for payment of money owed apply:
  1. Payment by principal to head contractor must be made within 15 days after payment claims is served;
  2. Payment by head contractor to subcontractor must be made within 30 days after claim is served; and
  3. Payment by head contractor to subcontractor in a residential project must be made within 10 days after claim is served.
 
Step 3: Adjudication Process
You may start adjudication under the following circumstances:
  1. If you have received payment schedule but the respondent has failed to make payment by the due date, you will have 20 days to lodge an application for adjudication;
  2. If you have received payment schedule but the payment amount is less than the claim amount, you will have 10 days to lodge an application for adjudication; or
  3. If you have not received payment schedule, the due date has passed, you have provided the other party notice of intention to adjudicate, and the other party had been given an additional 5 days to give payment schedule, you will have 10 days from the last day of the 5-day notice period to lodge an application.
Once your application for adjudication is received, the adjudicator will decide whether to accept your matter within 4 business days and make a decision within 10 business days from the date of acceptance. The respondent has 5 business days from the date of decision to make payment for the money owed.
 
Where parties are bound by a formal contract with clear terms and conditions for payment, it would be possible to recover any money owed in a quicker and more efficient manner without going through all the steps above. In fact, having a formal and complete contract in place is likely to expedite the payment process, minimise disputes and save parties the costs associated with resolving such disputes.

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