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Builders protected under the Security of Payment Act | Contracts Specialist

What is the
Security of Payment Act?

Call a Security of Payments Lawyer to get help on any of your payment issues such as late payment and non-payment.

call now: 02 8096 8576
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Rampant payment disputes in the building and construction industry was the main reason for the enactment of the Security of Payment Act in Australia

The Act is designed to enforce and protect the rights of builders while providing construction services and supplying goods and materials to their clients. It also promotes a fair and methodical way for contractors to claim the work they had done and for clients to respond to the payment claims.

Non-compliance to the Security of Payment Act may lead to adjudications that can very much affect both parties.

Scale and gavel used in adjudication for the Security of Payment Act NSW | Contracts Specialist
From the beginning of a construction project up to its completion, it is important that both parties do not just agree to work together; they must also agree to build and maintain a trusting relationship with the same goal and vision. However, there are events that could sour the relationship between parties.
One of these instances is failure to pay the contractor fairly. Payment issues could lead to some serious disputes that can even escalate into a court trial. The Security of Payment Act was legislated to avoid these payment disputes as well as to provide a quick solution to debt recovery.

Australia’s Building and Construction Industry

The construction industry is well-known for late payments and non-payments. Approximately, the industry:
Briefcase of small to medium-sized contractors covered by Australia’s Security of Payment Act | Contracts Specialist
is 97% small and medium-sized businesses
Money contributed by the construction industry in NSW under the Security of Payment Act | Contracts Specialist
is the same size as the financial services industry being about 8% of GDP
Australia and their construction industry complying to the Security of Payment Act | Contracts Specialist
employs 10% of Australia
Risks in the construction industry under the Security of Payment Act NSW | Contracts Specialist
makes up 20% of all insolvencies across different industries

Most transactions are high value and low-profit margin. Construction work is subject to a lot of risks. Many of these risks are outside of the businesses’ control such as time, weather, neighbours, etc.
The Security of Payment Act ensures that contractors and subcontractors get their rightful payment after rendering construction services. It enforces the contractor or subcontractor’s rights to progress payments and provides a fast debt recovery process.

Security of Payment Act

Many small subcontractors and suppliers do not get paid for their work.  Because of this, they cannot survive financially. Furthermore, most of these subcontractors and suppliers are small, family-run businesses; financial problems affect not only their businesses or companies but also their families.

Security of Payment Act is a legislation in New South Wales (with similar legislation in other states and territories in Australia) that assists subcontractors and suppliers in the building and construction industry to receive progress payment from builders and/or principals.

Objectives as per the Building and Construction Industry
Security of Payment Act 1999

  • 1. The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.

The first objective ensures the right of anyone who carried out construction work or supplied goods and materials to be given progress payments and recover debts.

  • 2. The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.

The second objective enforces the legal right, or privilege, of the person carrying out construction work to progress payments, whether or not it was stated in the contract.

  • 3. The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves:

(a)  the making of a payment claim by the person claiming payment, and

(b)  the provision of a payment schedule by the person by whom the payment is payable, and

(c)  the referral of any disputed claim to an adjudicator for determination, and

(d)  the payment of the progress payment so determined.

The third objective enumerates certain procedures that validate a party’s application to recover debts or progress payments: (a) A payment claim must be issued; (b) A payment schedule must be presented; (c) The referral of a disputed claim to an adjudicator and; (d) The determined amount to be paid.

  •  4. It is intended that this Act does not limit:

(a)  any other entitlement that a claimant may have under a construction contract, or

(b)  any other remedy that a claimant may have for recovering any such other entitlement.

The fourth objective simply states that the Act does not limit other entitlements and remedies that shall be granted to the contractor or the person carrying out the construction work.

Contractor rights under the Security of Payment Act in Australia | Contracts Specialist

Who benefits from the Security of Payment Act?

The Security of Payment Act benefits businesses who carry out building and construction work.
In particular, contractors, builders, and suppliers benefit from the Security of Payments Act.

Who can be assisted by this Act:

1. Subcontractors
2. Potential contractors for equipment
3. Plant hirers
4. Suppliers

The Security of Payment Act extends to:

1. Strata title bodies corporate
2. Developers
3. Landlords
4. Materials supplied (not just by the primary suppliers but also by subcontractors and consultants)
5.Residential building work (including investment properties)

What can the Security of Payment Act do for construction service providers?

1. Get paid for all the construction work or services that were carried out.
2. Enables them to challenge expenses or back charges.
3. Claim their possessions.
4. Helps deal with allegations of defective work.

Consultation regarding the Security of Payment Act NSW | Contracts Specialist

What rights does this building and construction industry payments act enforce?

List of rights enforced under the Security of Payment Act | Contracts Specialist
1. Your right to claim for work services and materials delivered.
2. Your right to enter a judgement in court if your claim is ignored.
3. Your right to have a disputed claim be determined fairly by a government-authorised adjudicator.
4. Your right to stop work without breaching a contract.

Is the Security of Payment Act costly?

NO. It is relatively cheap and efficient compared to the court system. The Security of Payment Act provides a quick and inexpensive process in recovering payment debts. The debt recovery process is not the usual trial that involves witnesses, court hearings, or cross-examinations. Moreover, it does not necessarily require extensive involvement of lawyers. In just a matter of weeks, the party who applied for adjudication, or known as the claimant, can have a judgement for a progress payment.

Who can you consult regarding payment disputes?

Building and Construction Lawyers

A construction lawyer is obliged to protect the contractor’s payments. Construction lawyers, also known as Building Solicitors, are legal professionals who can be consulted for legal advice or with legal matters specifically concerned with building and construction. They offer a wide range of services to any person in need of assistance with building and construction projects. 

Their duties and responsibilities are more than just representing builders, contractors, subcontractors, and homeowners. They provide services from the moment a project begins, or the planning stage, until its completion.

Building lawyers do not just ensure a legal and proper construction process of a building project. They also usually work with clients by providing them with legal services such as doing paperwork which include writing contracts, letters, and other documents. They directly communicate with the clients by taking instructions from them, and advising and discussing their legal matters particularly if it concerns their construction projects. Moreover, a building lawyer must ensure his/her client’s rights are enforced especially when the client is a contractor who may always be subject to payment disputes.

Importance of Paying your Contractors

Some clients or homeowners do not pay their contractors until they are obliged to. Of course, there are clients who pay their contractors early or on time. However, there are those who tend to delay their contractor’s payment. Or worse, they do not pay the contractor at all. 

So what good do partial payment, late payment, and non-payment do? Absolutely none! That is why it is important for contractors’ clients to know why they MUST pay their contractors. Below are more reasons on the importance of paying contractors:

  1. Contractors provide their clients with construction services needed for their building projects. Contractors are their clients’ building partners. A residential building would not be built according to a client’s liking and satisfaction if it were not for the contractors and builders who invested time and money for the success of the construction project. It is just reasonable that contractors are given what they rightfully deserve.
  2. It is the contractor’s right to get paid. The Security of Payment Act ensures the rights of the contractors to be paid fairly. With the legislation of this Act, contractor’s clients are obliged to grant contractors their statutory payments or progress payments.
  3. Contractors who would not be able to pay their employees, subcontractors, and suppliers may go bankrupt. This bankruptcy may lead to project delays or even more expenses if the client decides to look for another contractor. The ongoing building project will be put on the rocks with these problems arising.
  4. If contractors are not paid fairly and on time, it might result in having fewer contractors to hire. The fewer contractors there are, the higher the prices may go for future construction projects. Clients may have a limited number of choices of construction service providers who are available to work for them and who can price building projects.
  5. Ensuring that your contractors will get paid helps build a gratifying relationship with them. The secret to a successful building project is a healthy and trusting relationship. Clients must not just build a relationship with their contractors in the beginning of the contract, but must maintain it all throughout the project from its commencement to its completion. Who knows? Clients might need the skills and services of the contractor again.
  6.  

Why is the Security of Payment Act important?

  1. It gives contractors and subcontractors the right to defend themselves against unjustified late payments and non-payments.
  2. It applies to all construction contracts in NSW (except for home building works as defined under the Home Building Act), whether such construction contract is written, oral or a combination of both;
  3. It provides rights to subcontractors and suppliers which can help manage their cash flow; and
  4. The Security of Payment Act has tight time frames, which a builder or principal should be aware of, to ensure they can properly respond to claims for payment and protect their own interests and cash flow.
Sydney-based Building Defects and Home Building Dispute Lawyer | Contracts Specialist

How can Contracts Specialist help you deal with payment disputes?

Contracts Specialist is a specialist building and construction law firm based in Sydney. Its principal lawyer is John Dela Cruz, former Master Builders Association Divisional president, with over 10 years of experience in dealing with construction law. We regularly represent homeowners, developers, builders and contractors in residential, commercial, strata, and infrastructure matters.

Here are matters that we can help you with:

1

Contracts

2

Contract
Administration

3

Building Dispute

4

Defects and
 Incomplete work

5

Home
Warranty Claims

6

NCAT, Local Court, District Court, and Supreme Court matters

7

Statement of claims and defence
at all courts

8

Statutory demands applications and
setting aside

9

Security of payments enforcement and defence

10

In-house
counsel support

Contracts Specialist has vast knowledge and experience in construction contracts and disputes, including the application of the Security of Payment Act. Because we have been doing this for a long time, we are able to assist clients quickly and provide specialist advice as we are knowledgeable in all aspects of construction law and compliance. Our Security of Payment lawyer will go over your files and advise you on the next steps you can take.

  • We can help you with payment claims, and other matters that can help fast track finding the solution to your legal situation.
  • We inform clients of our costs without any hidden charges.
  • We are very transparent about fees.
  • We offer a complimentary 15-minute initial consultation

With Contracts Specialist, you can be assured that you will be in good hands.

CALL NOW: 02 8096 8576
BOOK YOUR FIRST FREE CONSULT

Related Links: Security of Payments Lawyer | 2019 Security of Payment Changes | How to Enforce a Payment Claim? | What is the Adjudication Process? | How to Enforce a Judgement? | Security of Payment NSW Flowchart | Payment Claim under BCIA 

You can be confident that you are getting the right legal advice.

Contracts Specialist is a Sydney-based construction law firm that deals with Building Disputes, Construction Contracts, Debt Recovery, and Security of Payment. With Contracts Specialist, you are ensured that you are in good hands.

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