Pay­ments for con­struc­tion


The Con­struc­tion Con­tracts Act pro­vides a sim­ple process for how and when pay­ments are due for con­struc­tion work.

The con­struc­tion work cov­ered by the act is wide rang­ing and in­cludes most work car­ried out in build­ing, al­ter­ing and main­tain­ing a house, larger struc­tures and in­fra­struc­tures such as roads and util­i­ties.

It also in­cludes most work car­ried out by plumbers.

Get­ting paid – pay­ment claims

When en­ter­ing into a con­struc­tion con­tract you can ei­ther ne­go­ti­ate the terms of pay­ment as a part of the con­tract, or rely on the de­fault pay­ment pro­vi­sions in the act.

It is im­por­tant to en­sure that the pay­ment obli­ga­tions in your con­tract are clearly set out. If you do not ne­go­ti­ate the terms of pay­ment un­der your con­struc­tion con­tract, the de­fault pay­ment pro­vi­sions in the act will ap­ply.

Th­ese en­ti­tle the party who is owed pay­ment for con­struc­tion work to be paid in in­stal­ments as the work is com­pleted. To en­sure you get paid and avoid dis­putes, you must is­sue a valid pay­ment claim un­der the act.

To be con­sid­ered valid a pay­ment claim must: be in writ­ing; in­clude suf­fi­cient de­tails to iden­tify the con­struc­tion con­tract to which it re­lates;

iden­tify the con­struc­tion work and rel­e­vant pe­riod to which it re­lates;

state the amount claimed and pro­vide a due date for pay­ment;

state how the amount was cal­cu­lated by you;

state that the pay­ment claim is made un­der the act. The pay­ment claim must also be ac­com­pa­nied by a writ­ten no­tice which out­lines the process for the payer to re­spond to the claim. The no­tice must also ex­plain the con­se­quences of the payer fail­ing to re­spond to or pay the claimed amount in full.

Dis­put­ing pay­ment – pay­ment sched­ules

A client served with a valid pay­ment claim must pay the claimed amount in full or, if they dis­pute the amounted claimed, is­sue a valid pay­ment sched­ule to the con­trac­tor within 20 work­ing days. To be con­sid­ered valid and com­ply with the act, a pay­ment sched­ule must: be in writ­ing; iden­tify the pay­ment claim to which it re­lates;

state the sched­uled amount the payer is will­ing to pay. If the sched­uled amount the payer is will­ing to pay is less than the amount in the pay­ment claim, the pay­ment sched­ule must also state:

‘‘Ad­ju­di­ca­tion is a fast track res­o­lu­tion process.’’

how the payer cal­cu­lated the sched­uled amount;

why there is a dif­fer­ence be­tween the amount claimed and the sched­uled amount;

the party’s rea­son why they are with­hold­ing pay­ment. If the client fails to pay the pay­ment claim in full by the due date or is­sue a valid pay­ment sched­ule, the con­trac­tor may sus­pend work and en­force the claimed amount as a debt due as well the le­gal costs of en­force­ment.

Re­solv­ing dis­putes – ad­ju­di­ca­tion

If there is a dis­pute be­tween par­ties to the con­struc­tion con­tract, they can re­fer the dis­pute to ad­ju­di­ca­tion.

An ad­ju­di­ca­tor can make a de­ci­sion which is bind­ing on all par­ties to the con­tract that is en­force­able as a court judg­ment.

Ad­ju­di­ca­tion is a fast track res­o­lu­tion process. How­ever, the act does not pre­vent a party from fil­ing a claim in the courts or for ar­bi­tra­tion of their dis­pute.

Col­umn cour­tesy of RAINEY COLLINS LAWYERS, phone 0800 733 484 or email aknowsley@rain­ey­

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