security of payment

Know your deadlines

Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act) is a very important piece of legislation, particularly for builders and the sub-contractors.

The Act allows for a swift resolution of payment disputes between builders and their sub-contractors, however, it also requires tight adherence to specific timeframes. If used quickly and correctly, the provisions of the Act will allow a sub-contractor to recover a payment or will allow a builder to successfully defeat a claim.

The pertinent timeframes are as follows:

(1) A payment claim is be served by a claimant (sub-contractor) on a respondent (builder) within the terms that are stated in the contract, or, if nothing is stated in the contract, then within the period of 3 months after the last batch of work was carried out.
(2) A builder (respondent) has to provide a payment schedule specifying either an amount that the respondent proposes to make, or refuse to make, the reasons for withholding a part or the whole of the payment and/or should state which amount is an excluded amount (if any). This payment schedule has to be provided to the claimant within the time required by the contract or within 10 business days after the claim is served.
(3) The claimant then has a choice depending on whether a payment schedule is served or not.

Payment schedule is served but the claimant does not agree with the amount and the reasons Payment schedule is not served
(1)        The claimant can apply for an adjudication provided that the claimant notifies the respondent within 10 business days immediately following the due date for payment of the claimant’s intention to apply for adjudication, and the respondent has been given an opportunity to provide a payment schedule within 2 business days after receiving the claimant’s notice.

 

(2)        The application can be made within 10 days of the provision of the payment schedule or if the respondent fails to pay the whole or part of the amount in the schedule and 5 days after the expiration of 2 business days after the notification of the intention to adjudicate is given to the respondent.

 

(1)  As in (1) and (2) in the left column; OR

 

(2)  Issue a Statement of Claim in Court.  The respondent has no defence to the claim if it has not complied with the tight timeframe required by the Act.

 

There is no prescribed form for a payment claim or payment schedule, apart from the fact that both have to identify construction work that both relate to, the project they relate to and the amount of payment sought/proposed to make.

It is of a vital importance that builders who are served with a payment claim pursuant to the Act do not ignore them and prepare payment schedule within 10 business days. Failure to do so can potentially result in a situation where you are precluded from filing a Defence to a claim or an adjudicator decides against you.

It is of an equal importance that the sub-contractors who serve their payment claims understand that should they wish to proceed with an adjudication process, they need to provide a notice of intention to proceed with the adjudication within 10 business days of receipt of a payment schedule, otherwise they are precluded from taking that option.

Make sure that you have a template for a payment schedule that can be sent quickly when required or speak with us today for assistance.

 

This article provides information that is general in nature and is not a substitute for legal advice.