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    How to get paid without spending big money on debt recovery

    Sep 30, 2020 11:59:12 AM

    Do you struggle with debtors? Do you find people don’t pay your invoices on time Do you struggle with cash flow? Do you want to a cost-effective way to recover your debts?

    Are you an accountant with clients in the construction industry or service providers to the constructions industry? Or, are you a tradesperson yourself providing construction work or a supplier of goods to the construction industry?

    Then this article is for you! Find out how to get paid faster without spending big money on debt recovery proceedings.

    In this article we will look at the Building and Constructions Industry Security of Payment Act 1999 (NSW) (“the Act”) colloquially known as the Security for Payment Act or ‘SOPA’ and what constitutes a payment claim under section 13 of the Act.

    A person under a construction contract who has carried out construction work or provided goods and services is entitled to receive a progress payment pursuant to section 8 of the Act.

    This is an enforcement mechanism pursuant to legislation, it gives definitive rules and timeframes. This is of significant benefit to clients to ensure you get paid sooner and keep your business thriving, especially in such uncertain times as we are all facing now with the COVID pandemic.

    What is a payment claim?

    A payment claim must:

    1. Identify construction work or related goods and services which the progress payment relates to;
    2. Indicate the amount of the progress payment that the claimant claims to be due (i.e. the claimed amount); and
    3. State that it is a payment claim made under the Act.

    This can be the inclusion of a line on your invoice or covering letter or email depending how you distribute your invoices, that this is a payment claim pursuant to the Act. If your invoice meets the criteria, then it will help fast track your way to getting paid under the Act.

    Compliance

    It is key to know the date you entered into a contractual agreement with the other party to carry out construction work or to provide goods or services because the Act had amendments made on 21st October 2019. It is imperative to know this information and what version of the Act applies to you.

    Any time restraints?

    You must serve a payment claim within 12 months of the work being completed or goods and services being provided. You can only serve one payment claim per month for construction work carried out or for goods and services provided in that month. This does not mean that you cannot include serving a payment claim for more than one progress payment.

    Put simply, if you have previous progress payments that remain outstanding, you can bundle them together as a new payment claim to recoup the whole amount owing.

    Please note that a payment claim may be served on or from the last day of the named month on which work was first carried out under the contract and from the last day of each subsequent month. E.g. you carry out work in June 2020 and serve a payment claim on 30 June 2020, your next payment claim could be made on 31 July 2020.

    The exception is that if the construction contract allows for an earlier date of serving a payment claim in any month, for example, the 15th of each month, then the payment claim can be served from that date instead.

    If you are seeking a payment claim in relation to a contract that has been terminated, the payment claim must be served on and from the date of termination.

    Anything else?

    Other things to consider:

    1. Are you a head contractor who has been contracted by the principal to undertake the constructions work and/or supply goods and services under the main contract?
      1. If you are a head contractor, you must include a supporting statement when serving the payment claim.
      2. A progress payment by a principal to a head contractor becomes due and payable 15 business days after a payment claim is served, unless an earlier day applies in the construction contract.
    2. Are you a subcontractor who carries out construction work or provides goods and services under a construction contract?
      1. If you are a subcontractor a supporting statement is not required.
      2. A progress payment made to a subcontractor becomes due and payable 20 business days after a payment claim is made, unless an earlier date is provided for in the construction contract.

    The exemption to these dates is a progress payment made under an exempt residential construction contract which becomes due and payable pursuant to the contract terms or if no express provision then the date occurring 10 business days after a payment claim is made.

    Please act if a payment claim remains unpaid. If not, you will end up with a pile of payment claims which need to be consolidated into a later payment claim causing unnecessary delays that could have been avoided.

    If the payment claim remains unpaid, then it’s time to issue an Adjudication Notice.

    This is part of the enforcement mechanism of the Act. It gives the debtor one more chance to pay before you move to the adjudication process.

    Key take-away

    Make sure your invoices:

    1. Identify what work it relates to;
    2. Clearly show how much is due under the payment claim; and
    3. State that it is a payment claim under the Act.

    If you have further questions, please contact us at frank@franklaw.com.au. 

    This is not legal advice. 

    Katherine McCarthy

    Written by Katherine McCarthy