About the Act

The government has recognised that cash flow is the lifeblood of the building and construction industry and in 2002 introduced the Building and Construction Industry Security of Payment Act 2002 (SOP Act) to help ensure that anyone who carries out construction work or supplies related goods and services under a construction contract, get paid.

 

The SOP Act applies to contracts or other arrangements that are written or oral, or a combination of both, for works carried out or goods and services provided in the state of Victoria.

 

The SOP Act does NOT apply to contracts for carrying out domestic building works with a building owner, unless the building owner is in the business of building residences, and the contract is entered into in the course of, or in connection with that business.

 

When disputes arise, or payments are delayed, the SOP Act provides a fast, cost-effective process to recover payments due under a construction contract, often without the need for lawyers. That process is called adjudication.

 

The process under the SOP Act is commenced by the claimant serving a payment claim, or performance security claim, on the party who may be liable to make payment or release a performance security. That party, the respondent, may respond with a payment schedule, or performance security schedule, confirming or disputing the amount claimed.

 

The SOP Act provides 3 pathways to adjudication:

 

1. The respondent provides a valid payment schedule, or performance security schedule, and the claimant disagrees with the amount that the respondent intends to pay or release
2. The respondent does not provide a valid payment schedule, or performance security schedule, and fails to pay or release the full amount claimed by the due date
3. The respondent provides a valid payment schedule, or performance security schedule, which the claimant does not dispute, but fails to pay or release the scheduled amount by the due date

 

An adjudication application is made to an Authorised Nominating Authority (ANA) who nominates an adjudicator to make a determination of the dispute. The adjudicator will determine, with reasons, the amount to be paid or released, the due date for payment or release, the rate of interest and any apportionment of their fees.

 

The adjudicator must assess, in accordance with the contract and the Act, the claimant’s payment claim, or performance security claim, and the reasons, if any, that the respondent has given for paying or releasing an amount less than the amount claimed. If the respondent fails to pay an adjudicated amount, including any amount of fees and interest that the adjudicator has determined, the claimant may request an adjudication certificate which can be lodged at the appropriate court which will register it as a judgment debt of the respondent.

 

The adjudication process under the SOP Act is fast and straight forward. The adjudicator has 10 business days from the date that an adjudication response may be served to complete their written determination. The adjudicator may ask the parties to consent to up to a further 20 business days.