Important facts • Interest is payable on the unpaid amount of a progress payment that has become due and payable. • If a progress payment is due and payable, a claimant can exercise a legal right (called a lien) to legally possess any unfixed plant or materials they have supplied to the respondent, until the progress payment is paid. What if a progress payment is not paid? If the claimant has made a payment claim, and the respondent does not accept the payment claim, a claimant can apply to have the matter dealt with by an adjudicator or a court. A claimant can make a claim in court or make an application for the matter to be heard by an adjudicator, if: • the respondent does not provide a payment schedule, or • the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or • the respondent does not pay the claimant in accordance with the payment schedule. A claimant can serve a payment withholding request on a principal contractor to retain sufficient money to cover the claim out of money that is, or becomes payable by the principal contractor to the respondent. Adjudication A claimant may apply for adjudication of a payment claim where the respondent provides a payment schedule but: • the scheduled amount indicated in the payment schedule is less than the claimed amount, or • the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount. The claimant may also apply for adjudication of a payment claim if the respondent fails to provide a payment schedule at all to the claimant and also fails to pay the whole or any part of the claimed amount by the due date for payment of the amount. Information relating to the adjudication of payment claims is outlined in Division 2, Part 3 of the Act. Fair Trading Security of Payment Guide fact sheet | July 2021
Key points: Adjudication • The Security of Payment laws provide rules relating to an adjudication application, such as the number of days an application must be made within. For more details see section 17 of the Act. • A claimant may withdraw an adjudication application at any time before an adjudicator has been appointed or before the application is determined. • Authorised nominating authorities (organisations authorised by the Minister) refer adjudication applications to an eligible adjudicator. The eligibility criteria for adjudicators is detailed in clause 19 of the Regulation. Trust account requirements If a head contractor has a construction contract with a principal that has a value of at least $20 million , the head contractor has an obligation to: Hold retention money in trust for the subcontractors entitled to the money. Ensure that the money is paid into and retained in a trust account established with an authorised deposit-taking institution (ADI) approved under section 87 of the Property and Stock Agents Act 2002. Ensure the retention money is paid into the trust account no later than 5 business days after the head contractor is required to retain the retention money. What is retention money? Retention money means money that is retained by a head contractor out of money that the head contractor is required to pay to a subcontractor under a construction contract as security for the performance of obligations of the subcontractor under the contract. For example, 5% of the contract’s value may be held as the retention money, or there could be an arrangement where there will be a 10% deduction from each of the subcontractor’s progress payments which is kept as the retention money component. Each construction contract may contain different terms and can be negotiated.
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