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You decide to proceed with some building works – it might be a new equipment shed or perhaps a new shed for hay storage. But then there’s an issue with what has been built and something isn’t up to scratch. As a result, you are refusing to make payment until the defect is rectified.

To make things worse, the builder is demanding payment for the work and has issued a notice pursuant to the Building and Construction Industry Security of Payment Act 2009 seeking payment or a progress payment. What is the Building and Construction Industry Security of Payment Act 2009? It is an Act which provides builders with a statutory entitlement to receive progress payments for a construction contract.

Where a progress payment has not been paid by the due date, the builder can issue a ‘payment claim’ for the amount owing. The amount of the progress payment is determined either in accordance with the contract or, if the contract makes no express provision, it is based on the value of the construction work carried out.

The most important issue for you in this situation will be responding to any notice issued by the builder. Under the Act you only have 15 days, or potentially a shorter period where specified in the contract, to respond and provide a ‘payment schedule’. If the payment schedule sets out that the amount to be paid is less than the amount claimed in the notice, it is necessary for you to set out the reasons why payment is being withheld – for example, due to the defects.

The reason why providing a response is important is that if you do not provide a response within the time allowed, you will then become liable to pay the amount claimed by the builder in full. If you do not then make payment in full, the builder can take you to Court to recover the amount being claimed and you will inevitably have to pay that amount in full.

The reason for this is that the Act sets out that you are unable to raise issues about any defective work nor issue a cross-claim as part of any proceedings commenced by the builder. What this means is that if you do not provide a response to the builder when a notice is issued, you will have to pay the amount of the progress payment and then seek to issue your own proceedings in respect of the defective building work and try to get those payments back.

This article was published in The Stock Journal on 10 June 2021.