John Dela Cruz is a Sydney based building and construction lawyer who specialises in Security of Payments law. John regularly has matters in adjudication and court to enforce and defend his clients security of payments rights.
If you own a building business chances are you’ve heard of the terms Security of Payments and progress claim.
You probably also know that this legal jargon is all about getting you paid but you might not be aware of everything involved. So here’s what every builder needs to know when making a progress claim.
Before we get to the nitty gritty of making a progress claim, assess if your invoice complies with the Security of Payment law.
If for example you are using Microsoft Excel or accounting software, like Xero or MYOB, to make your claim or adding the phrase “This is a Progress Claim made under the Building and Construction Industry Security of Payment Act 1999” to a WORD invoice, it does not comply with the Security of Payment law. This can ultimately extend the time in which you get paid. Here’re what Small Builders recommend for compliance in progress claims and getting paid.
How to Make a Progress Claim
Be crystal clear on the works you have carried out
If your Progress Claim is a one page summary it’s unlikely to be enforceable under Security of Payments law.
For example, if you are a painter, you don’t just say painting. You must Describe the Works You are Claiming. Identify the area you have worked on, list how many hours you worked, and add a list of materials used (ie litres of paint). Then support that claim with your evidence such as your quote, any correspondence, material receipts, photos, delivery documents, even toll payments.
Remember, for progress claims, more is MORE! So get as much helpful information into your claim as possible.
Be specific about the claimed amount
As with any legal matter, details are important so when making a claim be specific. Provide a detailed breakdown of your calculation. Indicate current line items, past claims, security, plus any variations on the works (need to know about variation notices? read this), both negative and positive. Be sure that those numbers add up and that the quote and contract breakdowns are followed in the progress claim.
In your progress claim, it is best practice to provide:
- Detailed summary of all applicable financials. Often this includes the contract price, any changes to the price, retention, deposit, claims made, schedules made, and payments made.
- A summary just for the retention monies withheld by the respondent. This should relate to each claim and specify the amount and date.
- A summary of past payments scheduled and received against past progress claims. A claim for payment should logically tell a complete story.
- Keep the tables in chronological order. This will make it easier for third parties like an adjudicator or a judge to read the progress claim.
Detail the basis for your claim
What gives you the right to make this claim? What can you show (evidence) to support your right to make this claim? Is there a contract provision? A milestone or event achieved? A reference date you can point to? Also important is to include the dates required for Security of Payments law so the payer has the opportunity to respond. You need to ensure that you actually currently meet the requirements to make the claim. Otherwise, your progress claim may not be argued as invalid.
Provide evidence and supporting documentation
You need supporting documentation and evidence. These include your business compliance declarations, insurance certificates of currency, plus any correspondence and evidence to support your claim. Photos and expert opinions may also be handy. If it is your final claim, be sure to read your contract. There may be specific supporting documents required for the final claim such as a deed of release or waiver.
Head Contractor Statement
If you are a head contractor then you need to submit a head contractor statement. This is a requirement of section 13(7) of the Building and Construction Industry Security of Payment Act 1999 (NSW) A head contractor is a person who is working directly for the client. For example, the builder that works directly for the developer is likely to be the Head Contractor. The statement essentially confirms that the builder has paid all of the subcontractors. Section 13(8) provides criminal penalties for false or misleading statements.
Any questions? Call us at Small Builders Software on: 02 0896 8576. We’ll talk you through it. We also have other free templates for builders from our construction software – just ask!