Claims, payment and security of payment

35 terms in claims, payment and security of payment

Progress claim

A progress claim is a claim for payment for work completed to a point in a building job, made under the payment structure the contract sets rather than a single invoice at the end. On residential contracts the stages and the amount payable at each are fixed at contract, and the claim raised the day the stage completes gets paid weeks ahead of the claim that waits for month-end. Progress claims reference. See also: Claim schedule, Payment claim.

Claim schedule

The claim schedule is the payment structure the contract fixes, the stages of the job and the amount or percentage payable at each. It is set when the contract is signed and cannot be quietly moved later, which is why the stage boundaries need to match how the job will actually build. It is a contract document, distinct from the payment schedule served under security of payment legislation. Progress claims reference. See also: Payment schedule.

Base stage

The base stage is the early claim stage on a typical Australian residential contract covering the footings and slab or base structure of the home. The contract wording, not the state of the site, decides exactly when the stage is complete and the claim can be raised. Progress claims reference.

Frame stage

The frame stage is the claim stage on a typical Australian residential contract at which the structural frame of the home is complete, commonly aligned with the frame inspection. As with every stage, the contract definition governs what the stage requires before the claim can be raised. Progress claims reference.

Lock-up stage

The lock-up stage is the claim stage on a typical Australian residential contract at which the home can be secured, generally external walls, roof covering, external doors and windows in place. The contract definition governs exactly what lock-up requires on a given job. Progress claims reference.

Fixing stage

The fixing stage is the claim stage on a typical Australian residential contract covering the internal fit-out, commonly internal linings, doors, architraves, skirting and built-in cabinetry fixed in position. The contract definition governs what the stage includes, and it is usually the last staged claim before practical completion. Progress claims reference.

Security of payment(SOPA)

Security of payment is the family of Australian state and territory laws that give anyone carrying out construction work a fast statutory right to progress payments, enforced through the payment claim, payment schedule and adjudication mechanism. The schemes differ by jurisdiction, including how owner-occupier residential contracts are treated. General information, not legal advice. Security of payment guide. See also: Payment claim, Adjudication.

Payment claim

A payment claim is a claim for payment served under security of payment legislation, which attaches statutory rights and deadlines to what would otherwise be an ordinary invoice or progress claim. Serving a valid payment claim starts the clock on the respondent’s payment schedule, and missing deadlines can decide the dispute by default. General information, not legal advice. Security of payment guide. See also: Payment schedule, Progress claim.

Payment schedule

A payment schedule is the formal response to a payment claim under security of payment legislation, stating how much the respondent proposes to pay and the reasons for any difference. Failing to serve one within the statutory window generally makes the claimed amount payable in full, which is why the response deadline matters as much as the merits. General information, not legal advice. Security of payment guide. See also: Payment claim.

Adjudication

Adjudication is the rapid statutory process under security of payment legislation that resolves a disputed payment claim without going to court. An independent adjudicator issues a determination on the papers within tight timeframes, and its pay-now-argue-later effect means the money moves even while wider disputes continue. General information, not legal advice; schemes and timeframes differ by jurisdiction. Adjudication reference. See also: Security of payment.

East Coast and West Coast models

The East Coast and West Coast models are the two design families Australia’s security of payment schemes historically fell into. The East Coast model, beginning with the NSW Act of 1999, creates a statutory entitlement to progress payments enforced through payment claims, payment schedules and adjudication, while the West Coast model implied payment provisions into contracts and took a lighter touch. Most jurisdictions now follow the East Coast approach. General information, not legal advice. Security of payment by state reference.

Owner-occupier exclusion

The owner-occupier exclusion is the carve-out in several security of payment regimes under which a contract with a homeowner who lives in or intends to live in the dwelling falls outside the scheme, leaving the builder to rely on the contract instead. Whether and how it applies differs by state. General information, not legal advice. Security of payment guide.

Response window

The response window is the statutory period a respondent has to serve a payment schedule after receiving a payment claim under security of payment legislation. The windows are short, differ by jurisdiction, and missing one generally makes the claimed amount payable in full, which is why diarising the deadline is part of a clean claims process. General information, not legal advice. Security of payment by state reference.

Evidence pack

An evidence pack is the bundle of photos, inspection records and certificates attached to a progress claim so the client can see the stage is complete without visiting site. Evidence attached to the claim turns approval from a negotiation into a formality, and it is the difference between a claim paid on terms and a claim queried. Progress claim checklist.

Retention

Retention is a percentage withheld from payments to a subcontractor as security for performance, typically released in parts at completion and at the end of the defects period. It is a different concept from retention of title on supplied materials, and the retention ledger is one of the records spreadsheets most commonly lose. Retention and payment terms reference. See also: Retention of title.

Payment terms

Payment terms are the agreed period between an invoice or claim and its payment, such as 30 days from end of month. A builder sits in the middle of the payment chain, paying trades and suppliers on their terms while being paid on the client’s, and the mismatch between the two is a structural gap the builder finances. Retention and payment terms reference.

Reference date

A reference date is the date fixed under security of payment legislation or the contract from which the right to make a payment claim arises for work done to that point. It anchors the timing of the whole claim and response process, and the rules for when reference dates fall differ by jurisdiction. General information, not legal advice. Security of payment by state reference. See also: Payment claim.

Progress payment

A progress payment is the statutory entitlement to be paid for construction work as it is carried out, which security of payment legislation gives to anyone who does the work. It is the right the payment claim enforces, distinct from the progress claim raised under the contract. General information, not legal advice. Security of payment guide. See also: Progress claim.

Claimant

The claimant is the party that serves a payment claim under security of payment legislation, the one seeking to be paid for construction work. It is the counterpart to the respondent, and the two terms run through every step of the statutory process. General information, not legal advice. Security of payment guide. See also: Respondent.

Respondent

The respondent is the party that receives a payment claim under security of payment legislation and must decide whether to serve a payment schedule in response. Missing the response deadline generally makes the claimed amount payable in full, which is why the respondent’s diary matters as much as its arguments. General information, not legal advice. Security of payment guide. See also: Claimant.

Claimed amount

The claimed amount is the sum a claimant states it is owed in a payment claim. It sits against the scheduled amount the respondent proposes to pay, and the difference between the two is what an adjudicator is asked to resolve. General information, not legal advice. Security of payment guide. See also: Scheduled amount.

Scheduled amount

The scheduled amount is the sum a respondent states it proposes to pay in a payment schedule, which may be less than the claimed amount and must give reasons for any difference. If it is less and the claimant disputes it, the gap is what goes to adjudication. General information, not legal advice. Security of payment guide. See also: Claimed amount.

Due date for payment

The due date for payment is the date by which a progress payment must be made, set by security of payment legislation where the contract is silent or non-compliant. The statutory maximum periods differ by jurisdiction and by the type of party, so confirm the current position with the relevant authority. General information, not legal advice. Security of payment by state reference.

Adjudication application

An adjudication application is the claimant’s formal request for a disputed payment claim to be determined by an adjudicator under security of payment legislation. It must be lodged within tight statutory timeframes, and lodging late can end the claim before its merits are heard. General information, not legal advice. Adjudication reference. See also: Adjudication.

Adjudication response

An adjudication response is the respondent’s reply to an adjudication application, allowed within tight timeframes and, in several schemes, only where a payment schedule was served in time. A respondent that did not schedule can lose the right to respond at all, which is why the earlier deadlines decide the later ones. General information, not legal advice. Adjudication reference. See also: Payment schedule.

Adjudicator’s determination

An adjudicator’s determination is the decision that resolves a disputed payment claim under security of payment legislation, fixing the amount payable and when. It has a pay-now-argue-later effect, so the money moves even while any wider dispute continues, and it can generally be enforced as a debt. General information, not legal advice. Adjudication reference. See also: Adjudication certificate.

Adjudication certificate

An adjudication certificate is the document that lets an unpaid determined amount be filed as a judgment debt and enforced, where the respondent does not pay. It is the mechanism that turns an adjudicator’s determination into recoverable money. General information, not legal advice. Adjudication reference. See also: Adjudicator’s determination.

Authorised nominating authority(ANA)

An authorised nominating authority is a body approved to receive adjudication applications and appoint an adjudicator under the security of payment schemes that use them. Whether nominations run through an authority or a government body differs by jurisdiction. General information, not legal advice. Security of payment by state reference.

Supporting statement

A supporting statement is a declaration that must accompany a payment claim in some jurisdictions, in which the head contractor states that its subcontractors have been paid what is due. Where it is required, serving a claim without it, or with a false one, carries consequences, so confirm the current requirement with the relevant authority. General information, not legal advice. Security of payment by state reference.

Right to suspend work

The right to suspend work is the statutory entitlement, under security of payment legislation, for a claimant that has not been paid a determined or scheduled amount to stop work after giving the required notice. It is a powerful remedy that depends on following the notice steps exactly. General information, not legal advice. Security of payment guide.

Pay-when-paid clause

A pay-when-paid clause tries to make a payment down the chain conditional on the payer first being paid from above. Security of payment legislation generally makes these clauses ineffective, so a subcontractor’s entitlement does not usually depend on whether the builder has been paid by the owner. General information, not legal advice. Security of payment guide.

Final payment claim

The final payment claim is the last claim on a job, typically at practical completion, that draws down the remaining contract value and any approved variations. Getting the variation register and the retention position right before it is served is what stops earned money being left uncollected. Progress claims reference. See also: Practical completion.

Cash retention

Cash retention is retention held by deducting money from each payment, as opposed to security given by a bank guarantee. It ties up the subcontractor’s cash and depends on the holder’s solvency to be returned, which is the trade-off against a guarantee that leaves the cash with the subcontractor. Retention and payment terms reference. See also: Retention, Bank guarantee.

Retention trust

A retention trust is an arrangement requiring cash retention withheld from subcontractors to be held in trust rather than mixed with the holder’s own funds, so it survives the holder’s insolvency. Where such schemes apply, and to which contracts, differs by jurisdiction and by project value, so confirm the current requirement with the relevant authority. General information, not legal advice. Retention and payment terms reference. See also: Project bank account.

Project bank account(PBA)

A project bank account is a trust account structure that holds progress payments and retentions for a project so money owed down the chain is protected if a party above becomes insolvent. Where these schemes operate, and the projects they cover, differ by jurisdiction, so confirm the current requirement with the relevant authority. General information, not legal advice. Retention and payment terms reference. See also: Retention trust.