What are Progress Payments?
Under the NSW HIA Lump Sum Contract, the builder is not obligated to specify that the claim is made under the SOPA. However, if the builder wishes to enliven it’s rights under SOPA then he must reference the SOPA
progress payments are payments made by the homeowner to the builder for the construction work completed up to a certain point. Progress payments can be made on a milestone basis, and they are intended to cover the builder’s expenses and ensure that the construction work continues according to schedule. Progress payments are usually based on the builder’s progress claim, which is a written request for payment submitted to the homeowner by the builder. The builder is not obligated to specify that the claim is made under the SOPA. However, if the builder wishes to enliven its rights under SOPA, then he must reference the SOPA, if any. Progress payments are an essential aspect of the construction process, and both parties should understand their rights and obligations under the contract.
Related Content: Understanding Progress Payments and Their Role in Building Contracts
The Importance of Clause 17 of the HIA Contract
Clause 17 of the HIA Contract outlines the progress payment provisions for the building project. This clause sets out when are the dates for progress claims, the process for making claims, and the calculation of the progress payments. It is important for homeowners to understand Clause 17 because it sets out the framework for the payment process for their construction project. If a homeowner fails to comply with the Clause 17 provisions, they may face liability for damages or even legal action. Therefore, it is crucial for homeowners to understand their rights and obligations under this clause to ensure a successful project outcome. Additionally, if a homeowner believes that the builder is not entitled to payment, they can refer to Clause 17 to ensure that the progress claim complies with the contract and relevant legislation.
The Role of Payment Schedules
As discussed earlier, a payment schedule is a document provided by the respondent (homeowner) in response to a payment claim. It is a crucial aspect of the progress payment process, and it plays a significant role in ensuring that both parties are aware of their intentions under the contract and the claimed amount.
Under the NSW HIA Lump Sum Contract, Clause 17 requires the builder to provide the homeowner with a payment claim. If the homeowner disputes the payment claim, they must provide a payment schedule within 10 business days. Failure to do so may result in the homeowner being liable to pay the claimed amount to the builder on the due date for the progress payment.
The payment schedule must identify the payment claim to which it relates and indicate the amount of the payment the respondent proposes to make. If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and provide the respondent’s reasons for withholding payment.
Homeowners should take payment schedules seriously and ensure that they provide them within the required timeframe. Failure to do so could result in the homeowner being liable to pay the claimed amount. If you need help with drafting a payment schedule or responding to a payment claim, it’s best to consult a construction lawyer who can guide you through the process.
In the next section, we will discuss the progress claim process and how it works under the NSW HIA Lump Sum Contract.
Understanding Progress Payment Claims
Progress payment claims are a request for payment from the contractor to the homeowner for work completed to date. Progress payment claims are usually made in accordance with the payment schedule set out in the contract, which outlines the specific amounts that are payable at certain stages of the project.
Is a progress claim the same as a payment claim?
The terms “progress claim” and “payment claim” are often used interchangeably. For the purpose of the HIA contract, a progress claim is a request for payment for work completed up to a certain stage, while a payment claim is a request for payment for work completed under the Security of Payment Act.
How does a progress claim work?
A progress claim must specify the amount claimed and the work performed up to the date of the claim. The claim must also be accompanied by any supporting documentation that the homeowner may reasonably require to assess whether or not the stage of works have been achieved. Once the progress claim is submitted, the homeowner has a set amount of time to respond with a payment schedule. If the homeowner fails to respond within the specified time, the claim is deemed to have been accepted.
Progress claim process
Under the HIA Lump Sum Contract, the progress claim process is governed by Clause 17. Clause 17 sets out the procedure for making a progress claim, the time for making a progress claim, and the process for assessing and certifying the claim.
How are progress payments calculated?
The amount of each progress payment is calculated by applying a percentage to the total contract price for the work completed to date. The percentage is usually set out in the contract’s payment schedule. For example, if the payment schedule specifies that 20% of the contract price is payable upon completion of the foundations, and the foundations have been completed, the contractor is entitled to a payment of 20% of the contract price.
Final progress claim
The final progress claim is the last payment that the contractor is entitled to receive under the contract. It is usually made upon completion of the project and is for the balance of the contract price less any previous payments made. Owners should negotiate the contracts to ensure that the final progress claim must be accompanied by a certificate of occupancy, a certificate of compliance, or any other certificate required by the contract or the law. This will allow the owners to lawfully occupy and insure the property.
Security of Payment payment claim
Under the Security of Payment Act, a payment claim can be made for work completed under a construction contract, even if the contract does not include a payment schedule. The payment claim must be served on the party liable to make payment and must set out the claimed amount, the work done to date, and the payment claimed. The payment claim must also comply with the Act’s requirements for timing and content.
Standard progress payment schedule NSW
The NSW Government has not published a standard progress payment schedule for use in construction contracts. Other states prescribe or suggest the schedule for the percentage of the contract price that should be payable at each stage of the project and can be used for residential projects. The standard payment schedule is intended to simplify the payment process and reduce disputes between homeowners and contractors.
Progress payment claims are an essential part of the payment process in construction projects. Understanding the process for making and assessing progress payment claims can help homeowners avoid disputes with contractors and ensure that payments are made in a timely and efficient manner.
The Security of Payment Act and Progress Payments
The Building and Construction Industry Security of Payment Act 1999 (NSW) (the “Act”) was introduced to provide security and certainty of payment to contractors, subcontractors and suppliers in the construction industry. The Act sets out a process for resolving payment disputes through adjudication, and it applies to all construction contracts in New South Wales, including the NSW HIA Lump Sum Contract.
Under the Act, progress payment claims are an essential part of the payment process. A payment claim is a written demand for payment that is served on the person who is responsible for paying the contractor. It can be issued at any time during the project and must include specific information, such as the amount being claimed, the work that has been completed, and the date the payment is due.
Once a payment claim has been served, the person responsible for paying the contractor has a certain amount of time to respond with a payment schedule. A payment schedule is a document that outlines the amount that will be paid, and when. If the person responsible for paying the contractor does not provide a payment schedule, they are deemed to have agreed to the amount claimed in the payment claim.
The Act provides strict timeframes for the payment process, and failure to comply with these timeframes can result in significant consequences. If a payment claim is not responded to within the required timeframe, the contractor can apply for adjudication, which is a quick and cost-effective way of resolving payment disputes.
It is important to note that the Act applies to progress payment claims made under the NSW HIA Lump Sum Contract, even if the progress claim does not specifically refer to the Act. This means that homeowners must still respond to progress payment claims made under the contract within the required timeframes and issue payment schedules if required.
Understanding the requirements of the Security of Payment Act is critical for both homeowners and builders. By ensuring that progress payment claims are made and responded to correctly, the risk of disputes can be reduced, and the construction process can proceed smoothly.
Final Progress Payments
The final progress payment is the last payment made by the homeowner to the builder, indicating the completion of the project. The final payment is calculated based on the agreed-upon contract price, minus any amounts already paid as progress payments.
Before making the final payment, it is crucial to ensure that all work is completed according to the contract’s terms and that any defects or issues are resolved. Once the final payment is made, the builder has no further obligations, and any defects or issues become the homeowner’s responsibility.
It is important to note that the HIA Contract requires the builder to provide a final invoice that specifies the remaining balance of the contract price, including any variations and adjustments. The builder must also provide proof of all necessary approvals, such as occupancy certificates, before requesting the final payment.
If the builder fails to complete the work as specified in the contract, the homeowner may withhold the final payment until the issue is resolved. If there is a dispute, the homeowner may seek legal advice to resolve the matter.
The final progress payment is a significant milestone in the construction process. It is crucial for homeowners to ensure that all work is completed according to the contract terms and that any issues are resolved before making the final payment. If there is a dispute, homeowners may seek legal advice to resolve the matter.
Get Expert Construction Contract Review and Advice
Get Your HIA Contract Reviewed Now
Step 1: Simply fill out this form and upload your contract.
Step 2: We’ll review it and return to you with a fixed fee quote.
Minimise construction risks on cost, time, and quality.
Get Home Building Contract Review and Advice now.
Conclusion
In conclusion, understanding progress payments and progress payment claims is vital for both homeowners and builders to ensure that the construction process runs smoothly and without any disputes. Clause 17 of the NSW HIA Lump Sum Contract is critical in determining the payment schedule, and it is important to understand the payment schedule as it affects the timing of progress payment claims. Additionally, the Security of Payment Act provides an extra layer of protection for both parties in the event of payment disputes.
If you have received a progress payment claim under the NSW HIA Lump Sum Contract and believe that the builder is not entitled to payment, it is essential to seek professional advice from a construction lawyer who can provide guidance on your legal rights and options. Don’t hesitate to contact a lawyer who can advise you on the best course of action to take.
As a solicitor and construction lawyer with more than 10 years of experience, I have advised homeowners, builders, and contractors on their contractual and legal rights, risks, and obligations. I have represented clients in all courts of competent jurisdiction in NSW, Australia. I have also negotiated and amended contracts to reflect my clients’ intentions.
If you have any concerns about progress payments or progress claims, don’t hesitate to seek professional advice from our construction lawyer. It could save you time and money in the long run, and it ensures that your dream home is completed without any payment disputes.
