Security of Payments Act – Getting Paid in the Building & Construction Industry

31 May Security of Payments Act – Getting Paid in the Building & Construction Industry

Security of Payments Act – Getting Paid in the Building & Construction Industry

The construction industry in this nation is an integral part of the economy. The industry is worth billions of dollars every year in New South Wales alone. So it’s not surprising that legislation has been developed in this state and others around the country that deal with the very issue of being paid for work that has been completed.

Under construction contracts, particularly those that involve considerable value, there is generally a staged approach to payment. In many instances, developers or construction owners will be borrowing funds from the credit institutions in order to fund their construction. These institutions will only offer up credit for payment to the builders once certain sections of the contract have been completed. Where issues arise during the life of these construction contracts is at the particular sections for completion of the project.

The SOPA Act

The Building and Construction Industry Security of Payment Act 1999 NSW (“Act”) is a piece of legislation that is specifically designed to improve the efficiency of the payment cycle in the building industry. It provides a quick and easy method for ensuring builders are paid for work that is completed in line with a construction contract. The idea being lower level builders have to pay their employees on a regular basis and if they are not being paid by the developers or construction owners for the work that has been completed, then many building companies, particularly the smaller ones will not be able to pay their employees and subsequently end up insolvent.

The Act covers a majority of commercial contracts. Construction of a residential building where the owner intends to reside in the property is not covered by the Act.

Adjudication

The Act provides a framework for construction industry participants to utilise in recovering payments. In disputed cases of progress payments, an applicant can file an application with an adjudicator which is appointed by a nominating authority under the Act.

There are timetables provided by the Act which ensure express delivery of outcomes for all participants. Again, this serves to promote the timely and efficient disposal of disputes in the industry.

At the end of the adjudication, the adjudicator will make a decision and provide a certificate if the applicant is succefssful. This certificate is recognised by the Courts when filing for a judgement to enforce the ruling.

Payment Claims & Payment Schedules

The two crucial parts of the adjudication process are the payment claim and payment schedule. Some of the key features of a payment claim are:

• the work that was completed;
• the cost of the works completed;
• the dates on which the works completed were carried out; and
• the required date for payment.

The key features of the Payment Schedule are:

• the reasons for withholding payment;
• any defective work that must be taken into consideration; and
• if there are specific defects in the payment claim, particularly those claiming the payment claim is confusing and unable to be properly understood as to what is being claimed.

Timeline for Events for Adjudication

There are strict timelines that must be observed under the Act for both claimants and respondents. If either party fails to adhere to the deadlines the adjudicator will not have jurisdiction to hear the matter. For this reason it is essential to make a note of the due dates for submitting certain documentation and ensuring it complies with the Act.

Should you require assistance with your matter, please give us a call for a free assessment. Our contact details are:

Berrigan Doube Lawyers

Melbourne:        (03) 9600 2577

Sydney:            (02) 9251 6699

Brisbane:          (07) 3229 0707