Security of Payment Act 1999 - claims in home building

New residential building contracts from 1 March 2021, are affected by the change of the Building and Construction Industry Security of Payment Act 1999 (the Act).

From 1 March 2021, home owners will no longer be exempt from the operation of the Act, meaning that builders and contractors working directly for home owners will be able to serve a statutory Payment Claim on home owners under the Act.

What should home owners do if they receive a Payment Claim?

If a home owner receives a Payment Claim from their builder or contractor which they wish to dispute, the home owner must respond to the Payment Claim in writing within 10 business days setting out the amount they agree to pay the reasons why the amount claimed is not due.

If a home owner does not respond in writing within 10 business days of receiving the Payment Claim, the amount claimed automatically becomes due and owing as a statutory debt and in a claim by the builder to recover that debt the homeowner will not be able to make any defence on the merits of the builder’s claim. That is, the claimed amount will be due and owing so long as the statutory requirements are followed no matter what the merits of the builder’s claim.

If a home owner responds to the builder or contractor’s Payment Claim as set out above, the builder or contractor may choose to lodge an adjudication application for the amount claimed within 10 business days after the home owner’s response. The home owner then has 5 business days to respond to the application after which the matter will be determined by an adjudicator, and extensions of time are not allowed.