Victoria's security of payment legislation — the Building and Construction Industry Security of Payment Act 2002 (Vic) — provides subcontractors and suppliers in the building and construction industry with a statutory right to progress payments and a fast-track adjudication process when those payments are disputed or withheld. Despite the Act being in force for over twenty years, a significant proportion of Victorian contractors remain unaware of their rights under it or do not use the process because they find it complex.
Who is covered
The Act covers construction contracts for building, engineering, demolition, and associated work carried out in Victoria. It applies to both residential and commercial projects. Subcontractors supplying labour, materials, or services to head contractors, and head contractors claiming from principals, can use the Act. Consumer-to-contractor arrangements (a homeowner hiring a builder directly) are covered only for contracts above the prescribed threshold.
Payment claims under the Act
A contractor issues a payment claim — a document that satisfies the requirements of the Act — to the party higher in the contractual chain. The claim must be in writing and must identify the construction work to which it relates and the amount claimed. It should state that it is made under the Act (although the 2021 Victorian amendments relaxed the requirement to use those exact words, it remains best practice).
The respondent — the party receiving the claim — must provide a payment schedule within the time specified in the contract (or 10 business days if none is specified). The payment schedule must state the scheduled amount to be paid and, if that amount is less than the claimed amount, the reasons for the difference.
What happens if the respondent doesn't respond
If the respondent fails to provide a payment schedule within the required time, the claimed amount becomes a debt due and owing. The contractor can sue for it in a court without further process, or apply to have it adjudicated. The respondent's failure to provide a schedule removes their right to dispute the amount in any adjudication.
Adjudication
If the scheduled amount is less than the claimed amount, or if the respondent has withheld payment, the contractor can apply to an authorised nominating authority (ANA) for adjudication. The ANA appoints an adjudicator, who must determine the application within 10 business days (or longer if the parties agree). The adjudicator's determination is binding and can be enforced as a judgment debt.
Practical tips
- Issue payment claims promptly — the Act sets reference dates from which claims can be made, and missing the window may require waiting for the next reference date.
- Maintain detailed records of work performed and materials supplied to support any claim.
- Respond to payment schedules you receive — failing to respond can have adverse consequences for principals too.
- Use the Act proactively rather than waiting until a dispute has escalated to the point where the commercial relationship has broken down.
Contact Merion if you are a Victorian contractor or subcontractor with unpaid progress claims — we work with specialists in SoP adjudication and can help you understand your options.