What is the Security of Payments Act (NSW)
Everything you need to know about the Security of Payments Act (NSW)
Whether you’re employing a contractor to help fit out your new business office or install a new marble benchtop in your home, it is important to be careful of the legislative provisions that regulate how and when you pay those workers. The Building and Construction Industry Security of Payment Act 1999 is state based legislation that regulates the payments for work delivered in the building and construction industry.
If you are undertaking a small or large scale building project, LawPath’s expert construction lawyers can help you better understand your rights and obligations when hiring contractors.
What is the Security of Payments Act (NSW)?
In NSW the industry is regulated by the Building and Construction Industry Security of Payment Act 1999 NSW.The Act sets out the rules and procedures that professionals such as principals, head contractors, subcontractors and suppliers must adhere to when making payment, claiming payment or withholding payment.
The Act protects the rights of construction workers to receive progress payments for goods or services delivered and ensures that workers under a contract are entitled:
- To receive and to recover, progress payments in relation to the carrying out of that work; and
- The supplying of those goods and services.
Entitlement to payment
Under the Act, contractors are entitled to receive progress payments under any contract. This includes verbal, written contracts and absent contracts where the contract may stipulate that the contractor is not entitled to claim progress payments. These include independent contractor agreements which sets out the rights and obligations of each party.
Progress payments are calculated on the value of work or supplies that have been carried out or delivered and the terms of the contract. Where there is a dispute over the amount of a progress payment owed, contractors may choose to engage an arbitrator to help determine the dispute. Additionally, unless otherwise stated within the contract, any claim for progress payments can only be made once per month.
Where there is a progress payment owing for construction work and a claim has been made by the owed party, the Act has specific time limits for payment to be made:
- Payment by principal to head contractor: 15 days after claim is made.
- Payment by head contractor to subcontractor (non-residential): 30 days after claim is made.
- Payment by head contractor to subcontractor (residential): 10 days after claim is made.
If a person does not intend to pay the total amount claimed, they may provide a payment schedule within 10 days of the claim being made. A payment schedule is a notice in writing that must be served to the claimant to inform then the debtor does not intend to pay the amount claimed. The payment schedule must identify the payment amount being claimed and state reasons as to why the person proposes to pay less than the amount claimed.
If there is a dispute or unresolved conflict between the parties regarding the amount claimed, the claimant may initiate adjudication and engage the services of an adjudicator. The claimant must submit their notice of intention to apply for adjudication 20 days after the due date has passed.
Breach of the Act
The Building and Construction Industry Security of Payment Act protects the rights of contractors and suppliers under a construction contract to receive and recover progress payments for carrying out work and supplying related goods and services. There are severe financial and criminal penalties if the security payment laws are intentionally breached and enforcement action may be taken against the property of a debtor.
If you have a payment dispute or are looking to hire a contractor, LawPath’s experienced construction lawyers can advise you on your rights and obligations.
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Jennifer is a Paralegal, working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a keen interest in media and IP law, her research focuses on the evolving role of the law to navigate new and emerging information platforms.