Security of Payment Act NSW – Construction Industry

What is the Security of Payment Act NSW?

The Security of Payment Act NSW exists to address the disparity between the bargaining power of a builder or developer and the subcontractors engaged in building works who wind up in a dispute about payment.

While the Security of Payment Act NSW legislation is not uniform between the states, there are common aspects amongst the different jurisdictions, so you should obtain advice to ensure you are properly complying with the relevant legislation, as failure to comply with technical aspects of the legislation may be fatal.

The Security of Payment Act NSW ensures that all parties involved in construction projects across both private and public sectors in NSW receive their rightful progress payments without delay. Contractors and suppliers are guaranteed prompt payment for their work, including final payments and retention funds. Even in contracts lacking progress payment clauses, the legislation empowers claimants with a statutory right to submit payment claims and receive timely compensation. Should any payment disputes arise, respondents are required to provide transparent reasons in a formal payment schedule. With the Act in place, fair and efficient payment processes are guaranteed for all stakeholders in construction projects.

FAQs (Frequently Asked Questions)

How do I claim?

Your claim must:

  • Be submitted within the timeframe specified in your contract, or if not stipulated, by the last day of the month.
  • Be in writing and addressed to the respondent.
  • Clearly describe the construction work, related goods, or services for which you are claiming.
  • State the amount claimed as due.
  • Include a statement such as “This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 NSW” or a similar statement conveying the same meaning.
What can I claim for?
You can file a claim against the respondent for:
  • Construction work performed.
  • Construction materials or plant provided or hired out.
  • Consulting services rendered.
  • Interest on overdue progress payments.
  • Losses and additional expenses incurred due to work deletion from the contract during a work suspension under the Act.
  • At the contract’s conclusion, a claim under the Act can be made for final payment.
How long do I have to wait for a response?
The first window is upon submission of your claim, the respondent has a maximum of 10 business days to provide you with a payment schedule if they are unwilling to pay the full amount claimed. This schedule must be a written statement detailing the amount the respondent is willing to pay and the reasons for any non-payment. The Second window is a five day period based on the service of a notice under section 17 of the Act.
What happens if the respondent provides a payment schedule for less than the amount claimed?

You have two options:

  • Accept the reasons provided by the respondent for the partial payment and await payment of the scheduled amount by the due date.
  • Submit a written application to an Authorised Nominating Authority (ANA) for adjudication within 10 business days of receiving the payment schedule.
What happens if the respondent does not provide a payment schedule?
Failure to provide a payment schedule within the stipulated timeframes obligates the respondent to pay the full amount of your claim by the due date. If the respondent fails to do so, you have the option to either initiate legal proceedings to recover the amount or pursue adjudication under the Act. Regardless of the chosen course of action, you retain the right to suspend work after issuing notice and to assert a lien over unfixed plant and materials supplied.
What is adjudication?
Adjudication is an independent process conducted by an adjudicator to determine the amount due for a progress payment claimed under the Act. Only the claimant can initiate adjudication proceedings.
What is an Authorised Nominating Authority (ANA)?
To commence adjudication, the claimant must submit a written application to an Authorised Nominating Authority (ANA).
What happens if the respondent fails to pay the adjudicated amount?
The claimant can request the ANA to issue an adjudication certificate. This certificate can then be filed in the appropriate court as a judgment. The claimant must support the certificate with an affidavit confirming the outstanding amount. The resulting judgment is enforceable in the same manner as any court judgment, bypassing the need for time-consuming and costly court hearings.
What types of work are covered under the Act?
The Act encompasses various construction and building work in both public and private sectors, as well as professional services such as architectural, design, surveying, plant and equipment hire or purchase, demolition, and supply of building materials.
Does the Act apply to homeowners?
The Act does extend to contracts with homeowners who reside in or intend to reside in the dwelling where the work is conducted, as these contracts fall under the jurisdiction of the Home Building Act 1989. However, the Act covers all work materials and plant supplied by subcontractors, consultants, and suppliers to contractors engaged in contracts with such homeowners. All other residential work, including investment properties, landlords, strata title bodies corporate, developers, builders, contractors, subcontractors, consultants, and suppliers, is governed by the Act.