Security of Payment Claim Lawyers

A person who carries out construction work or supplies related goods and services under a construction contract is entitled to receive and recover payment. Security of Payment Claims are intended to reduce insolvency in the construction industry, providing specific rights and protections for contractors, and imposing a statutory mechanism for recovering payment. For a detailed explanation of what constitutes a valid payment claim under the SOP Act and how to prepare one, see our guide on what is a payment claim.

Note: Only construction works and services completed in the past 12 months can be claimed. 

What is the Security of Payment Act?

The Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOP Act”) is a powerful statutory tool that allows clients under a contract to claim payments due for construction work or construction related goods and services in NSW. The Act provides a simplified and accessible legal framework to resolve payment disputes, reducing financial hardship felt by contractors.

The SOP Act aims to: ensure prompt payment, reduce disputes, and protect cash flow. For the full range of building and construction legal services, see our building and construction lawyers page.

Who can make a claim?

The SOP Act can be used to make a claim by:

• Head Contractors
• Subcontractors
• Hire Companies
• Material Suppliers

Construction related Consultants for goods and services.

As of 2021, the SOP Act also provides protections for owner occupier construction contracts for residential building work. This means, head contractors can make a claim against a homeowner for their completed works. Where payment disputes are part of a broader contract dispute, such as variations, delays, or defects, see our building contract disputes lawyers page.

What work can be claimed?

You can make a claim for construction work and services in New South Wales even if the contract:

• Is not in writing;
• Does not include progress payments, or
• Requires only a single payment to be made on completed works.

You can make a claim for:

• Construction work completed
• Construction material or plant provided
• Consulting services
• Interest from overdue progress payments
• Losses or additional costs due to suspended work
• Cash security and retention money
• Final payment concluding your contract.

It is mandatory for all construction contracts valued over $20,000 to contain the Security of Payment Guide.

Payment Claim Process

1. Making a Security of Payment Claim

To be valid, a payment claim must be in writing and meet the following requirements (section 13 SOP Act):

1. Identify the Work: The claim must clearly describe the construction work or construction goods and services for which the payment is sought.
2. Indicate the Amount: It must state the amount claimed is due and payable.
3. State the claim is under the Act: The claim must explicitly state it is made under the SOP Act. This is crucial to trigger the Act’s protections.
4. Supporting statement for Head Contractors: If you are a Head Contractor making a claim, you must also provide a supporting statement including a declaration that all sub-contractors have been paid all amounts due and payable.

2. Responding to a Payment Claim

If you receive a Payment Claim against you, you must respond.

If you dispute the Claim made against you, you have ten business days to serve a payment schedule (section 14 SOP). The Schedule must:

1. Identify the payment claim;
2. State the Scheduled amount, i.e., the amount of the payment you wish to make; and
3. If the scheduled amount is not equal to the total amount claimed, reasons why payment is being withheld.

If no payment schedule is served, you will be liable for the full amount claimed, and the applicant may recover debt through adjudication.

3. Adjudication

If progress payments are not being met, you may then seek recovery through adjudication.

• Intention of Adjudication: After the due date of payment, the claimant has 20 business days to serve a written notice of intention to apply for adjudication on the respondent. The respondent has 5 business days after receiving the notice to provide a payment schedule.
• Adjudication Application: This is to be lodged by the applicant and must:
  1. Be in writing;
  2. Be made to an authorised nominating authority;
  3. Be made within the timeframe – see specific times;
  4. Identify the claim; and
  5. Include the application fee from the authorised nominating authority.

     The adjudicator can only begin the process after the respondent has lodged an adjudication application response.

• Adjudication Procedure and Determination: The adjudicator will assess the merit of a payment claim. The Adjudicator may request further submissions, a conference with parties, or carry out inspections. The Adjudicator will determine:
  1. The amount to be paid to the claimant,
  2. The date on which the amount is due and payable, and
  3. The rate of interest payable on the amount.

Where the respondent to an adjudication is a company and fails to pay the determined amount, serving a statutory demand may be the appropriate next step. See our statutory demand lawyers page. If a payment dispute cannot be resolved through adjudication, you may enforce the adjudication decision through litigation. Our civil and commercial litigation lawyers can assist you at this stage without delay.

Time Limits and Deadlines

The SOP Act includes strict time limits to ensure disputes are resolved efficiently, and payments are made within a reasonable timeframe.

A summary of the key deadlines under the Act for making a payment claim, responding to a payment claim, and applying for adjudication is set out in the NSW Government’s security of payment guidance.

The SOP Act is beneficial for those in the construction industry, acting as a tool to ensure quick access to funds, reduce the risk of non-payment, streamline dispute resolution and encourage fairer payment practices.

How we can help you

If you wish to use the SOP to make a payment claim, or have received a claim under the SOP Act, you should contact our Team without delay.

Citilawyers can assist you to:

• Prepare for and make a SOP Claim
• Provide advice for a response to a SOP Claim
• Appeal from adjudication determinations

Areas We Assist

Our Security of Payment lawyers act for contractors, subcontractors, and principals throughout Sydney and across New South Wales, including Parramatta, Chatswood, North Sydney, Liverpool, Penrith, Ryde, Bondi Junction, Inner West, Sutherland Shire, Hornsby, Burwood, Bankstown, Manly, and Newtown, as well as clients in regional NSW.

Given the strict statutory deadlines under the SOP Act, most matters are managed remotely by phone, email, and electronic document exchange, so clients across NSW can act quickly without needing to attend our Sydney CBD office.

Understanding the provisions of the SOP Act is essential to protecting your rights and ensuring payment disputes are recovered quickly and effectively. Citilawyers acts with speed and strategic clarity to provide the strategic and procedural advice needed to navigate the strict statutory timeframes.

For more on debt recovery generally, visit our debt recovery page to learn more.