Security of Payment Act Still a Mystery?

This  is a quick blurb about the Security of Payment Act that may help you understand it, and use it.

Construction Trade Industry Lawyers have had many successes this year- getting payment for them by using the Act.

What is Security of Payment?

The term “Security of Payment” is a reference to the Building and Construction Industry Security of Payment Act. This Act sets out a statutory regime whereby people who carry out construction work in NSW can enforce payment for their work, provided they follow the statutory regime. The legislation is intended to facilitate cashflow in the construction industry. People who intend to rely on Security of Payment to get paid must follow the rules set out in the Act. These rules are pretty basic, such as

  •  you need to set out what work was carried out and some mechanism for how the sum is calculated – say by reference to your quote. – you need to put the “magic words” [“This is a payment claim issued under the Building and Construction Industry Security of Payment Act”] on the bottom of your invoices to turn the invoice into a payment claim.
  • Finally, you need to serve it to the person who is liable to pay. However, If the rules are not followed, your payment claim will be invalid and you can’t rely on the Act for payment.
  • How does it facilitate cashflow? The advantage of using the Act to get paid is that if you issue a payment claim and you don’t get a response within 10 business days, you can get judgment on the whole amount of your claim. The other party is not allowed to defend the claim, nor can they back charge or set off the sum against claims that they may have against you.

MISTAKES AND HOW TO AVOID THEM

  •  A common mistake is trying to rely on a verbal contract. Have a written contract that includes terms for claiming payment and being paid. NECA Legal has developed some terms of trade that you can fill in each time you start work for a new customer. (If you need these, just contact NECA Legal.)
  •  A common mistake is not reading the Act before sending out the payment claim. Where do you find it? Search Google   (which will come up with the website for all Australian legislation).
    • Then go to NSW Consolidated Acts.
    • Then click on “B” and then “Building and Construction Industry Security of Payment Act 1999”.
  • You should pay particular attention to section 13 as this section states what MUST be in the payment claim. A common mistake is to miss one of these mandatory details.
  • Your payment claim can look like an invoice. But you MUST explain what work you did (reference to your quote and any purchase order, include timesheets/photos if necessary), you MUST say how much money is due and you MUST include on the document the phrase “This is a payment claim made under the Building and Construction Industry Security of Payment Act”.
  • Unless your contract terms & conditions state otherwise, you CAN ONLY ISSUE ONE payment claim per month and it MUST be on the LAST DAY OF THE MONTH. A common mistake for “do and charge” or verbal contracts is that they are issued immediately after the work and there could be several per month. NECA Legal’s terms of trade entitle you to issue as many payment claims as you like per month. 6. Your payment claim MUST be delivered by hand, sent by post or send by facsimile. DON’T use email – this is still “invalid service” (unless you have agreed it’s ok in your terms & conditions).