Security of Payment NSW: Payment Claims and Adjudication Explained

What it is

The Building and Construction Industry Security of Payment Act 1999 (NSW) is the statute that lets anyone who carries out construction work or supplies related goods and services in New South Wales recover progress payments quickly. It runs alongside your contract. You can use it even if the contract is silent on progress claims, and most attempts to contract out of the Act are void under section 34.

The Act is enforced through a strict timeline. Miss a deadline and you can lose the right to a payment schedule defence, lose the right to apply for adjudication or be ordered to pay the full claimed amount as a judgment debt.

Who it applies to

The Act covers construction work and related goods or services performed under a construction contract in NSW. That includes head contractors, subcontractors, suppliers, consultants and labour-only trades on residential, commercial and civil projects.

There is one major carve-out for residential builders. Section 7(2)(b) excludes contracts for residential building work where the other party is a resident owner who lives in or proposes to live in the home. A builder cannot serve a Security of Payment claim on a homeowner under that section. The Act still applies down the chain between the builder and its subcontractors and suppliers.

The payment claim

A payment claim under section 13 must:

• be in writing and addressed to the respondent
• identify the construction work or related goods and services
• state the claimed amount
• state that it is made under the Act

Since the 2019 amendments a head contractor must also attach a supporting statement declaring that all subcontractors have been paid amounts due. Serving a false supporting statement is an offence.

A claim can be served once each reference date, which for most NSW contracts is monthly unless the contract sets a different date. The final claim must be served within 12 months of the last work performed.

Payment schedule and the 10-business-day rule

The respondent has 10 business days to reply with a payment schedule under section 14, or a shorter period if the contract specifies one. The schedule must state the amount the respondent proposes to pay (the scheduled amount) and, if that is less than the claimed amount, the reasons for withholding and the reasons for any disputed amounts.

If no payment schedule is served within 10 business days the respondent becomes liable to pay the full claimed amount on the due date. The claimant can then either:

• recover the unpaid amount as a debt in court under section 15, or
• apply for adjudication after first giving a second-chance notice of at least 5 business days

Adjudication

If a payment schedule is served but the scheduled amount is less than claimed, or the scheduled amount is not paid, the claimant can apply for adjudication under section 17. The application must be lodged with an authorised nominating authority within 10 business days of receiving the schedule. The adjudicator must usually determine the dispute within 10 business days of accepting the application.

The determination is enforceable as a judgment debt. The respondent can pay into court and challenge it in limited circumstances, but the merits cannot be reopened. Adjudication is a pay-now-argue-later mechanism.

Right to suspend work

Under section 27 a claimant who has not been paid the scheduled or adjudicated amount can suspend work after giving at least 2 business days written notice. The claimant is not liable for any loss or damage caused by the lawful suspension and is entitled to an extension of time for the period of suspension.

What this means for TradeLens compliance

For builders working under the NSW regime, the practical compliance points are diary discipline and document control. Date-stamp every payment claim received, calendar the 10-business-day response deadline and serve a payment schedule even when you intend to pay in full. Suppress the urge to ignore claims you think are inflated. Silence costs you the defence.