Security of Payments Act

3 June 2025 in Building and Construction Law | 8 min read | skip to FAQs

This article provides an overview of the recovery process for payment claims, focusing particularly on the adjudication process for these claims, under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA), including the key steps, timeframes, and practical considerations for claimants.

SOPA

Put simply, the aim of the SOPA is to ensure that when construction work (or supply of goods or service), under a construction contract, is carried out by a person, that person is entitled to receive and recover progress payments for that work or goods. It is a legislative measure, established in 1999 that aims to prevent or efficiently resolve payment disputes in the construction industry. The SOPA is highly structured with well defined rules and procedures.

Steps involved in Making a Claim under SOPA in NSW

1. Preparation of a Payment Claim

Who Can Make a Claim?

Any person who has undertaken to carry out construction work, or to supply related goods or services under a construction contract is entitled to make a claim for a progress payment. This includes a builder, contractor, subcontractor, supplier, architect, engineer or surveyor. There were two amendments in 2021. In March, SOPA was extended to include builders and contractors when dealing directly with the homeowner, also known as residential owner occupiers. In June, it was mandated that all construction contracts over the value of $20,000 were to include a SOPA provision. In 2024 there was an amendment to the SOPA that states that a building contractor must be properly licensed and insured to rely on SOPA for a payment claim, (s4 and s92 of the HB Act). The definition of a “construction contract”, under s4 of the SOPA, is broader than that of the Home Building Act 1989 (NSW) (HB Act), thereby capturing agreements which fall out of the HB Act’s scope. This means that constructions such as commercial buildings and bridges are also covered by the SOPA.

Requirements of the Payment Claim

The payment claim is to be issued (served) on the person who, under the construction contract, is liable to make that payment. This would typically be the principal or property owner.

The payment claim must:

1. Identify and give a clear description of the work performed (or the related goods or services);
2. Indicate the amount of the progress payment;
3. State that the payment claim is made under the SOPA.

There are Strict Time Periods Allowed for Payment Claims

A payment claim may be issued:

1. On, and from, the last day of the named month in which the construction work was first carried out (or goods or services were first supplied) under the contract; and
2. On, and from, the last day of each subsequent month.

A payment claim must be issued:

1. Only within the time period outlined by the contract; or
2. Only within 12 months after the construction work to which the claim relates was last carried out (or the related goods or services were last supplied), whichever is the later.

2. The Payment Claim should result in a Payment Schedule

The Payment Schedule

The principal or homeowner, known as the respondent, should reply to the payment claim by providing a payment schedule to the claimant. This must:

1. Identify the payment claim to which it relates; and
2. Indicate the amount of the payment (if any) that the respondent proposes to pay.
3. If the amount stated in the schedule is less than the claimed amount, the payment schedule must indicate why that amount is less and their reasons for withholding that amount.
4. The respondent must issue a payment schedule either within the time required by the relevant construction contract or within 10 business days after receipt of the payment claim, whichever time expires earlier.

What happens when the Respondent fails to pay?

If a payment claim is issued and the respondent does not respond within the time limit with a payment schedule, the respondent becomes liable to pay the claimed amount on the due date for the progress payment.

Where the respondent fails to respond to a payment claim with a payment schedule, becomes liable to pay the claimed amount, and fails to pay that amount, the claimant, under s15 of the SOPA can:

1. Commence legal proceedings to recover the unpaid amount from the respondent. That is pursue the debt through conventional debt recovery processes; or
2. Make an adjudication application regarding the payment claim. Adjudication is a form of dispute resolution.

The claimant may also serve a notice to the respondent, which states that they intend to suspend the construction work or supply of goods under the construction contract (s15).

3. The Adjudication Application

When can the Adjudication Application be Made?

A claimant may apply for adjudication of a payment claim where:

1. The respondent has provided a payment schedule, however, the respondent has included an amount that is less than the amount claimed by the payment schedule (referred to as a claim under s17(1)(a)(i) or the respondent fails to pay any part of the indicated amount by the due date (referred to as a claim under s17(1)(a)(ii))
2. The respondent failed to provide a payment schedule and failed to pay the claimed amount. In this instance, the claimant can only make an adjudication application once they have given a written notice of their intention to do so. This notice must be provided within 20 business days following the payment due date (referred to as a claim under s17(1)(b)).

The Adjudication Application has strict Requirements

1. Must be in writing;
2. Must be addressed to the Authorised Nominating Authority (ANA) of the claimant’s choosing, (a list of such authorities is provided by NSW Fair Trading ;
3. Must be sent within certain time limits. Within 10 business days of the payment due date, if it is an application under s17(1)(a)(i), within 20 Business days of the payment due date, if it is an application under s17(1)(a)(ii) or within 10 business days of the payment due date, if it is an application under s17(1)(b) of the SOPA.
4. Must identify the payment claim and payment schedule, if any, to which the application relates;
5. Must include the adjudication application fee, if any, as may be prescribed by the relevant ANA, however such a fee must not exceed the amount determined by the relevant Minister; and
6. May include, at the claimant’s discretion, any submissions (documents) relevant to the application.
7. The claimant must also send the application to the respondent.
8. The claimant may withdraw the application at any time, prior to the appointment of an adjudicator or, if the adjudicator has been appointed, prior to the application being determined. The withdrawal process involves giving written notice to both the respondent and the relevant ANA or adjudicator.

4. The Adjudication Process

Appointment of an Adjudicator

The relevant ANA will give the application to an adjudicator. The adjudicator is an independent arbitrator. If the adjudicator consents, they will send notice of this to the claimant and respondent. By accepting the application, the adjudicator is considered to have been appointed to determine the application (s19).

The Adjudication

Respondent’s right: If the respondent provides a payment schedule, they should lodge a response to the application (adjudication response) within 5 business days of receiving the application or 2 business days of receiving notice that the adjudicator has accepted the application (s20).

Time Period: Once the period for the respondent to lodge a response has expired, the adjudicator will determine the application:

1. Either within 10 business days of the adjudication response expiration date OR, where no payment schedule is lodged, within 10 business days of the adjudicator sending the notice of acceptance of the application; or
2. Within a further period that the claimant and respondent may agree to.

Process: In adjudication proceedings, the adjudicator has the authority to request further written submissions (ensuring both parties can respond), set deadlines, hold informal conferences (without legal representation), and inspect relevant matters. The decision-making power of the adjudicator is unaffected by any failure of the parties to participate or comply with these requests.

Decision: An adjudicator must decide the amount (adjudicated amount), due date and interest on any progress payment, based only on the sections of the SOPA, the construction contract, submissions, payment schedule if any, and inspections of the adjudicator. The decision must be in writing, with reasons unless waived, and given to both parties.

If an adjudicator has previously determined the value of construction work, goods or services supplied under a construction contract, that value must be used in any later adjudication unless it is shown that the value has changed.

5. The Outcome of the Adjudication

If the adjudicator decides that the respondent must pay the adjudicated amount, the respondent is required to pay that amount to the claimant either:

1. Within 5 business days of the respondent receiving the adjudicator’s decision; or
2. Within the later due date set by the adjudicator.

Should the respondent fail to pay the adjudicated amount, the claimant can request an adjudication certificate under s24 of the SOPA. The claimant is then able to file this as a judgment debt with the relevant court. The adjudication certificate is enforceable by the courts as a court judgment. In simple terms, SOPA authorises the builder or contractor to pursue debt recovery through the court system.

Suspension of work: The claimant may also suspend work after giving 2 business days’ notice if payment is not made. This enables contractors some leverage to ensure compliance with the

Key Take Aways

Entitlement to Progress Payments: Any person, performing construction work or supplying related goods or services, including under a contract compliant with the Home Building Act 1989 (NSW) is entitled to make progress payment claims under the SOPA.

Strict Timelines and Process Requirements: Both payment claims, and payment schedules must adhere to defined timelines and contain specific information. Failure to respond to a payment claim on time may result in automatic liability for the full claimed amount.

Adjudication for Dispute Resolution: If disputes over payments arise, the claimant can initiate adjudication, a simplified and efficient process where an independent adjudicator determines the amount owed based on the contract and relevant submissions.

Enforceable Outcomes and Suspension Rights: Once adjudicated, unpaid amounts can be enforced as court judgments. Additionally, claimants have the right to suspend work if payment is not made within the prescribed timeframes.

How can BSM Sydney Lawyers assist you?

Brander Smith McKnight Sydney Construction Lawyers are industry experts with over 35 years of experience handling residential, commercial and industrial construction legal advice and building disputes. Our clients include builders, home owners, property developers, contractors, engineers and body corporates. Our Sydney construction lawyers have extensive experience in every stage of the building process including pre-contract negotiations, drafting and review of construction contracts, negotiation and review of finance contracts, legal advice regarding construction claims, debt recovery and dispute resolution. In relation to the Security of Payment act, SOPA, we can assist with:

1. Advice about the Act: Our expert building contract lawyers can explain to you the complexities and nuances of the Act and how they apply to your unique circumstances. We can explain your rights and obligations and your eligibility to make a claim.
2. Making a Claim: BSM construction lawyers Sydney can make and enforce a claim under the SOPA. We can advise on how the payment will be calculated and when the progress payments are legally due. The Act requires strict compliance with timeframes and procedures so seeking expert legal advice from an experienced building contract lawyer is highly recommended.
3. Applying for or responding to Adjudication of a Claim: The building contract lawyers at BSM Sydney Construction Lawyers will explain the criteria, eligibility and application requirements when making an adjudication application. We will represent you and strongly advocate for you during the adjudication process.
4. Our construction lawyers are renowned as industry experts and provide a free 20-minute consultation to assess your individual case.

FAQs

BSM Sydney Construction Lawyers has offices conveniently located in Sydney CBD, Sutherland, Parramatta, Shellharbour and Wollongong.