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Rules on progress payments in Queensland
Deposit limits
The Act sets out three different deposit limits that cannot be changed. Where the contract price is:
- less than $20,000 you cannot take a deposit greater than 10% of the contract price; and
- $20,000 or more you cannot take more than 5% of the contract price as a deposit.
The last deposit limit applies mostly to kitchen and bathroom suppliers and installers. Where the value of the off-site work is more than 50% of the contract price you can take up to 20% as a deposit. Off-site work is defined as contracted services performed at a place that is not the place at which the domestic building works it to be finally installed or constructed under the contract.
Progress payment schedules
There are no longer any prescribed progress payment stages, nor are there restrictions on using your own defined progress schedule. HIA have provided in the HIA QC1, QC2 and QC3 contracts a sample schedule to help provide the industry with a workable payment schedule. The contracts also still allow for a customised schedule to be entered into where you can alter the progress claims to align with your particular job. However there are rules under the Act that you must comply with; specifically a builder under a domestic building contract must not claim an amount other than a deposit, unless the amount:
- Directly relates to the progress of carrying out the work at the site; and
- Is proportionate to the value of the work that relates to the claim, or less than that value.
As an illustrative example: For 50% of the completed job you are entitled to 50% (inclusive of deposit) of the contract price. HIA contracts also provide a definition of each stage at which payment claims will be made under the sample progress schedule. If a builder chooses to use the same terminology as the sample schedule provided in the HIA contracts, the definitions of each stage will apply. The builder may customise and change those definitions to suit a particular job.
The most important thing to remember is that you cannot demand or receive an amount in advance under the contract, other than the deposit.
We recommend that whenever you wish to make changes to the standard conditions of an HIA contract that you have the changes reviewed by a HIA workplace adviser or your solicitor.
Disputes over progress payments
There are several types of disputes that may arise regarding progress payments. The following are some generic examples (excluding final claims):
- Progress stage has not been completed: An owner may dispute as to whether a progress stage has been completed. For any dispute under this category reference should be made to the relevant definition of the progress stage. It is important that all work for the stage, as defined in the relevant definition, is completed. Sometimes it is unclear whether a particular item or job on the build falls into one progress stage or the next. This is because it would be difficult and impractical to allocate every item and job to a particular progress stage. If an owner disputes under this clause you have the following options:
a. Engage with the owner to seek a resolution
b. Complete the additional requested works and then resend the progress claim
c. Get the QBCC involved through their Early Disputes Resolution service; or
d. Suspend the works until payment is made.
- Lending body is withholding payment: Banks are becoming more involved in domestic building projects sometimes holding-up payment until certain matters on the build have been completed. Under HIA domestic contracts the bank does not have a right to withhold payment. A refusal by the bank to release payment is, in effect, the client refusing to make payment on the progress stage.
- Late payment: Sometimes an owner is consistently late on their payments. Provision is made under HIA contracts for default interest to be charged on any late payments, including when the bank is withholding payment.
It is very important to understand your contractual rights during any dispute with the client. Knowing where you stand can assist in resolving disputes before they escalate into more damaging disputes.
To find out more, contact HIA InfoCentre
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