Guide to Building and Construction Industry Security of Payment Act

27 May 2023 in Building and Construction Law

A Guide to the Building and Construction Industry Security of Payment Act

The Building and Construction Industry Security of Payment Act 1999 (NSW) is a central piece of legislation for the building and construction industry. Its primary purpose is to ensure that anyone contractor carries out work or supplies materials under a construction contract is paid in a timely manner or has a prompt method to recover payment.

The Act provides a range of statutory rights to parties claiming payment, including the right to progress payments, interest on late payments, the right to suspend work and a right to a lien. These rights help to ensure that parties are paid promptly and fairly for the work they have undertaken or the materials they have supplied.

One of the key benefits of the Act is the prompt process for payment or recovery of payment claims outlined in Part III, Procedure for Recovering Progress Claims. Under this part of the Act, a contractor who has made a payment claim is entitled to either receive payment or receive a payment schedule from the Head Contractor or Principal within 10 days. If the Head Contractor or Principal fails to provide payment or a payment schedule within this timeframe, the contractor may make an adjudication application under section 17 of the Act to have the dispute resolved.

The adjudication process is designed to be a quick and cost-effective method of resolving payment disputes. An adjudicator is appointed to review the payment claim and any payment schedule provided by the Head Contractor or Principal. The adjudicator then decides on the amount that is owed and provides a written decision within 10 business days of receiving the application.

It is important to note that parties to a construction contract cannot contract out of the Act. This means that even if a contract includes terms that conflict with the Act, those terms will not be enforceable. 

The Building and Construction Industry Security of Payment Act plays a vital role in ensuring that the building and construction industry operates fairly and efficiently. By providing statutory rights to parties claiming payment, a prompt process for payment claims and a quick and cost-effective method of resolving disputes, the Act helps to ensure that contractors, subcontractors, consultants and suppliers are paid promptly and fairly for the work they undertake or the materials they supply. 

The Act also requires strict compliance with the timeframes and procedures within the Act and it is important that any party to a construction contract seek legal advice regarding any aspect of the Act including the drafting of payment claims, payment schedules, adjudication applications and adjudications responses.  The expert building and construction lawyers at Brander Smith McKnight have the expertise in construction law to advise and assist on these matters.