Security of payment

The process starts with the contractor/claimant making a payment claim. This is essentially just an invoice, though it must identify itself as being made under the Act, for example “This is a payment claim under the Building and Construction Industry Security of Payment Act 1999”.

A payment claim cannot be made under the SOPA unless there is an available reference date, being a date fixed by the contract, or the legislation, as a date for making payment claims. Unless the contract otherwise provides, only one claim can be made in any named month.

Once a payment claim has been submitted, the principal (or head contractor) has 10 business days to respond, unless the contract prescribes a shorter period. This response must be in writing and is called a ‘payment schedule’.

If the principal or head contractor fails to provide a payment schedule, within the required timeframe, it will be liable for the entire amount of the claim. The contractor can t hen recover this amount as a debt in court.

If the principal issues a payment schedule within time, but the contractor disagrees with the assessment, the claimant can make an ‘adjudication application’.

Adjudication is a strict process that allows the claimant to recover a disputed or unpaid progress payment. The dispute is determined by an independent adjudicator, which is not a judge, and appointed by an independent nominating authority.

The adjudication application is a written document that must be sent to the nominating authority within a fixed period, typically 10 business days from the date the payment schedule is served upon the claimant. The exact timeframe will depend on the circumstances.

The response to an adjudication application must be made within 5 business days of receiving the application, or 2 business days after receiving notice of the adjudicator having accepted their appointment, whichever is longer. Both timeframes are exceptionally short.

A claimant has an express right to withdraw an adjudication application. The respondent may object to the withdrawal if an adjudicator has been appointed.
Most importantly, the respondent is not entitled to include in its adjudication response any reasons for withholding payment that were not included in its payment schedule.

Once the time for a response has lapsed, the adjudicator is required to determine the application. Typically, this is done by reference to the application and the response, with neither party having any right to appear before the adjudicator. It is not uncommon for the adjudicator to seek further submissions from the parties.

The adjudicator’s determination is required within 10 business days of the respondent’s submission. Brief extensions are not uncommon if approved by the parties. The adjudicator’s decision is easily registered as a judgment debt at court, and enforced as such.

Once a determination is obtained, you will be able to enforce that determination as though it was a court judgement.

Note: SOPA decisions are interim only

However, the adjudicator’s decision is not the final say. If you have lost at adjudication, and believe the outcome is unfair, you can advance a claim to recover the money. The purpose of fast-track adjudication is not to resolve the dispute in a final sense, it is to get money flowing within the construction industry. You might have had to pay the builder more than you wanted, but there is nothing to prevent you from attempting to recover sums through a court claim in the usual sense.