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Commencing legal proceedings for non-payment by the homeowner

It is a common theme within the building industry for the builder to be owed money by the homeowner. This can be frustrating when all requirements and obligations under the contract have been met, but money, usually the final payment, is still outstanding. If you are owed money under your building contract in New South Wales, there are options available to ensure you are paid.

Before commencing legal proceedings

If you are owed money from the homeowner, consider the following first:

Security of payment options

Builders and contractors can use the rapid adjudication process under security of payment laws in NSW to recover overdue payments from a homeowner quickly and in a less expensive way compared to traditional legal proceedings in court. 

Builders and contractors can serve a payment claim on a homeowner if the contract was entered into after 1 March 2021. 

Letter of demand 

A letter of demand is a notice to the other party asking for money to be paid. It warns the other party that if payment is not received by a certain date, you may start a legal proceeding to recover the money they owe you plus any additional permitted costs.

It should clearly identify the sum of the money owed, and the timeframe for the money to be paid (generally 7 days)

Information about writing a letter of demand for smaller debts can be found at LawAccess NSW. Formal legal advice should be sought for larger amounts.  

Where can I commence legal proceedings for non-payment? 

If the above options are unsuccessful, you may consider commencing legal proceedings in court or tribunal. Where you commence your legal proceedings in will depend on the value of the debt.

New South Wales Civil and Administrative Tribunal (‘NCAT’)

NCAT is a specialist tribunal that can hear and resolve disputes about residential building work in NSW up to the value of $500,000. It is less formal than the court system for recovering money for home building disputes. NCAT can also make orders against a homeowner for non-payment of building work.

Going to NCAT

Some key facts about commencing action in NCAT:

  • To start a claim, you need to file an application with NCAT.
    Note: You may need to contact NSW Fair Trading first before filing the application.
  • Once the application is filed, you will be given notification of a hearing date. This will generally be within 10 to 28 days.
  • You will need to prepare for your hearing and gather evidence to prove that the money is owed. Evidence includes copies of the building contract, contract variations, and any correspondence between you and the owner regarding the debt (such as the letter of demand).
  • NCAT will set down a timetable for when certain things must be done by the parties, such as the exchange of certain documents.
  • NCAT provides parties with the chance to resolve the dispute through conciliation before it hears the matter. Conciliation is a confidential process where a third party (either a Tribunal Member or an independent conciliator) attempts to assist you to resolve the dispute. 
  • NCAT has special procedures for Home building applications depending on the value of the claim (i.e. claim under $30,000 and those over $30,000).
  • You can seek permission for legal representation (this will depend on the dispute value, and whether the other party is represented or not).

Court

  • Local Court:
    • Small Claims Division deals with claims up to $20,000 (parties are usually self-represented). 
    • General Division is for claims that are more than $20,000 and up to 100,000 (parties usually have legal representation). 
  • District Court or the Supreme Court deal with claims that are greater than $100,000 (parties are usually legally represented). 

Note: If a claimant commences a building claim in a court, and that claim could have been commenced in NCAT, the defendant can elect to transfer the proceedings to NCAT instead.

The first step in having your case heard in a court hear is to fill out a statement of claim. Guidance material is available for recovery of smaller debts in the Small Claims division of the Local Court. 

Other Debt Recovery Options

Debt Collection Services

Another viable option available is through a debt collection service where a business will attempt to recover money for you for a fee.

Information on your options and how to use a debt collection service.

To find out more, contact HIA's Contracts and Compliance team

Email us

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