Security of Payments Claims by Residential Builders

Security of Payment Claim for Residential Building

From 1 March 2021, for the first time, residential builders can make a security of payments claim against a client homeowner.

Call us. We can:

explain how it works
explain your options
negotiate the best outcome for you

What does the change mean?

Builders will be able to make a payment claim under Security of Payment laws against homeowners who they are carrying out residential building work for and recover moneys owed to them by homeowners through the security of payment rapid adjudication process.

The laws will generally apply between builders and homeowners, the same way they currently do between builders and their subcontractors.

Does this change apply to my current residential building contracts?

No, this change only applies to new residential building contracts signed after 1 March 2021.

What is a payment claim?

A payment claim is a short statement that details the payment owed for building and construction works.

A payment claim may be your usual invoice, as long as it includes some mandatory details.

How do I issue a valid payment claim?

Include a statement on your invoice that “This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999’’.
Include a supporting statement which can be accessed
Clearly describe the construction works or related goods or services to which it relates.

To claim payment under the laws, you must do so within 12 months of performing the work, or supplying the goods and services.

What happens after I have issued a payment claim?

The homeowner must either:

pay the amount; or
respond within 10 days with a payment schedule that sets out a different amount.

If the homeowner does not make the payment claimed or respond with a payment schedule the claimed amount becomes a debt due and owing that the builder can enforce in court.

If the homeowner responds with a different amount, the builder can proceed to adjudication.

Can I still claim progress payments in accordance with my contract?

Yes. Provisions in your contract that set out payment terms and time frames continue to apply and can be enforced against your clients.

Security of payment laws operates in addition to any contractual options in relation to non-payment that may be available.

Are there any changes to my contracts?

It is likely that you will need to include a Fact Sheet regarding Security of Payment laws in your building contracts. The purpose of the Fact Sheet is to inform homeowners of their responsibilities under the laws.

It is likely that the HIA, MBA and Fair Trading will shortly update their contracts to ensure compliance with the new requirements.

*credit to the HIA for the above summary