Security of payment - overview

In South Australia, the Building and Construction Industry Security of Payment Act 2009 (the Act) covers those carrying out construction work under a construction contract.

The Act puts in place various payment protection measures including:

• a right to claim progress payments;
• procedures for claiming and disputing progress payments;
• a rapid adjudication system to determine payment disputes; and
• that ‘pay-when-paid’ provisions are invalid.

What is covered by the Act?

Contracts for domestic building work between a resident (or future resident) and a builder or tradesperson are not covered by the Act.

To be covered by the Act, the contract must be for construction work or the supply of related goods and services, including:

• new building work;
• addition, alterations and extensions;
• installation of services including electrical, plumbing and HVAC;
• preparatory work such as demolition, site clearing and prefabrication;
• painting and decorating;
• supply of building materials and plant;
• architectural and engineering services; and
• subcontracts for building labour.

The contract may be written, or oral, or a combination of the two.

If a contract is covered by the Act, it is not possible to include a provision that alters or restricts the effect of the Act.  This means the Act will apply, regardless of what the parties intend or include in the contract terms.

Making a payment claim

A payment claim must:

• identify the building works to which the claim relates;
• indicate an amount that is being claimed for the completed works; and
• state that it is made under the Act.

Claim value

The value of the claim is calculated either:

• in accordance with the contract; or
• if the contract doesn’t specify a value, based on the value of the work, goods or services provided.

Construction work is valued with regard to:

• the contract price for the work
• the rates or prices set out in the contract
• any variations agreed to by the parties
• any defective work and the estimated cost of rectifying the defect.

A claim may also include retention monies due for release.

Timing of claim

A payment claim must be issued within the later of either:

• the period stated in the contract; or
• 6 months from completion of the works.

Due date for payment

A payment claim must be paid by:

• the date set out in the contract; or
• if no date specified, 15 working days from the date of the claim.

If a payment claim is overdue, it may be subject to interest.  The claimant also has the right to exercise a lien over unfixed plant or materials.

Responding to a payment claim

The recipient of a payment claim made under the Act (the respondent) may respond to the claim by providing a payment schedule to the builder. A payment schedule must identify:

• the payment claim
• the amount proposed to be paid; and
• all reasoning why payment is being withheld if the respondent is paying less than the claimed amount.

The payment schedule should be issued by the earlier of either:

• the timeframe set out in the contract; or
• 15 business days from the date of the claim.

The undisputed amounts of a payment claim must be paid by the due date.

If a respondent has not provided a payment schedule it will not be permitted to respond to an adjudication application.

What happens if the respondent doesn’t pay?

The claimant may apply for adjudication if:

• a payment claim is not paid by the due date; or
• if the amount claimed is reduced in the payment schedule.

They also have the option to suspend the works by written notice, in accordance with the procedure set out in the Act.

As an alternative to adjudication, the claimant can recover the unpaid amount in court.

HIA has further information on the adjudication process.