Security of Payment Act VIC

If you are employing a contractor to complete a construction project, it is better that you are aware of the legislative provisions that regulate how and when you pay them. The Building and Construction Industry Security of Payment Act 2002 VIC, is Victorian-specific legislation. It was designed to reduce the instances of insolvency in the building and construction industry in Victoria. The industry is regulated by the Building and Construction Industry Security of Payment (Amendment) Act 2006 in Victoria, applicable to all construction contracts entered into on or after 30 March 2007. The amended Act ensures that the construction workers receive their payments related to the work being carried out and the supply of building materials and services under a contract.

Making a claim under the Victorian Building and Construction Industry Security of Payment Act 2002 requires the claimant to serve a payment claim on the party liable to pay for construction work or associated material or services under a construction contract. If the other party (respondent) does not send a written response to the payment claim within 10 business days, the claimant can provide the respondent with a second chance to respond, under the Act.

How does the security of payment work?

The purpose of enforcing The Victorian Building and Construction Industry Security of Payment Act is to promote cash flows in the contracting chain. The Act includes general protections for the contractors and a mechanism for quick recovery of progress payments. Here’s how it works:

  • Under the Act, a claimant has a statutory right to receive regular progress payments by making a payment claim. This Victorian-based Act enables a claimant to only recover claimable amounts in its payment claim and cannot include any excluded amounts.
  • Once a payment claim is received, the respondent has 10 working days to send a written response to the claimant. The number of working days can also be reduced through a document called payment schedule.
  • If the claimant disputes the assessment made by the respondent, they can apply for adjudication, the process which we have already discussed earlier.     

General Protections for Contractors

The Security of Payment Act ensures that a building contractor/subcontractor/tradespeople in the construction industry will get the right payment for the delivered goods and services, as outlined in the contract. The general protections for the contractors include the following:

Right to progress claims: Here, you get the right to be paid during the entire construction Work.

Right to claim for interest: As long as the payment is outstanding, you can claim interests on the debt.

Right to suspend the current work or supply of goods: You can suspend the construction work or supply of goods for some valid reason.

Right to have a disputed claim be judged fairly by an authorized government adjudicator: You can initiate adjudication procedures under the law.

Right to approach the court if your claim is ignored: You can approach the court if adjudication was unfavourable to you.

Procedure for Recovering Payments

Ensuring you adhere to the strict time frames as set out with in the contract and with in the SOP Act are key to ensuring you are best places for a rapid adjudication and the potential payment of your invoices and payment claims.