- Does the SOP Act apply to this contract?
- What is the earliest date that a performance security claim can be served?
- What is the latest date that a performance security claim can be served?
- What must a valid performance security claim include?
A performance security claim is a claim made under the SOP Act, for the release of the whole or part of a performance security (performance bond or retention money) held by a respondent under a construction contract for works performed or related goods and services provided.
Before making a performance security claim, there are 2 critical questions to consider:
Does the SOP Act apply to this contract?
The SOP Act applies to MOST contracts to carry out construction works, or to supply related goods and services. The contract (or other arrangement) may be in writing, or oral, or a combination of both.
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 can I make a performance security claim?
What is the earliest date that a performance security claim can be served?
A performance security claim under the SOP Act may be served:
- A day that is at least 20 business days after the end of the relevant defects liability period for the construction work carried out or related goods or services supplied under the construction contract to which the performance security relates;
- On or after a day, or on or after the day of the occurrence of an event (if any), specified in the construction contract.
What is the latest date that a performance security claim can be served?
A performance security claim under the SOP Act must be served no later than the latest of:
- The day (if any) determined under the construction contract as
the latest day on which the performance security claim may be
served; or
- The last day of the named month following the named month in
which the last defects liability period set out in the construction
contract (if any) ends.
The claimant’s entitlement to serve a performance security claim on a person is not affected by the termination, purported termination or expiry of the construction contract under which the person is or may be liable to release the performance security.
A performance security claim may be served alone or in conjunction with a progress payment claim.
Critical note: Date a performance security claim is taken to be served:
If a claimant serves a performance security claim on a person before the earliest date (as provided for in the contract, or calculated in accordance with the Act):
- The performance security claim is NOT invalid.
- The performance security claim is taken to be served on the earliest date.
- The time within which a person may serve a performance security schedule does not commence until the earliest date.
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What must a valid performance security claim include?
A valid performance security claim must:
- Identify the construction work or related goods and services to which the performance security and the claim relates. (It is critical to provide sufficient information for the respondent to understand what performance security they are being asked to release).
- Specify the type and amount of performance security claimed (the claimed amount).
- State that it is made under the Security of Payment Act. Include the following text on the progress payment claim: “This is a performance security claim under the Building and Construction Industry Security of Payment Act 2002” (or words to that effect)
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