Message from our Education and Technical Manager

Are you getting paid on time?

In the perfect world, you present a payment claim for the completed period or the stage of the works, and the client pays it no questions asked… however, this is not always the case. Builders are finding themselves, with more frequency, having to chase these payments owed to them, which they are rightfully entitled to.

So why is it that clients think it is okay to withhold these payments? From my experiences of dealing with builders and clients when there is a default in payment, there are many different reasons, some include: • Defective work • Price variances • Delays • Workmanship concerns • Lack of detail in the payment claim • Poor reforming clients For whatever reason, if you don’t cut corners and ensure to dot your I’s and cross your t’s from the beginning to the end, you will mitigate having to deal with most of these reasons. So, what does “dotting your i’s and crossing your t’s” look like? 1. First and foremost you must have a building contract in place, preferably a New Zealand Certified Builders (NZCB) Building Contract. • A building contract identifies what payment claim arrangement you will be using; designated (defined stage payment claims) or periodic payment claims (fortnightly or monthly). • The building contract identifies the time frame length the client has before making payment, after receiving a payment claim. • The building contract outlines the process a client needs to follow if they are going to challenge all, or part of, the payment claim. • The building contract also identifies if the owner does default on a payment claim, what process there is to resolve the situation.

2. Ensure you have the discussion up front on the current industry constraints from COVID-19 when signing the contract. • Discuss how the contract will respond to price increases and supply delays. • Download the COVID-19 Contract Clause Addendum which explains how NZCB Building Contracts will respond to price increases and delays. 3. If at any time during the building work there are: • delays resulting in the expected completion date to change; • price increases; • variations or additions;

ensure that you confirm these changes with the client in writing. Have the client confirm acceptance, and approve a variation notice. This will reduce the likelihood of any pushback from the client when you are submitting this variation in your next payment claim. 4. Serve to the client valid payment claims. What does a “valid payment claim” look like?

A payment claim must meet the following nine criteria. 1. It must be in writing. 2. It must identify the construction contract to which the payment relates to. An example of this would be to reference: NZCB Cost and Mark-up Contract. 3. It must identify the construction work you are charging for. Be detailed and precise. It is not recommended to be broad with your description. 4. It must state the total claimed amount. 5. It must indicate the basis of how you arrived at your calculated total figure. 6. It must identify the relevant date period to which the payment claim relates. 7. It must state the due date for payment. 8. State “This is a Payment Claim made under the Construction Contracts Act 2002.” 9. Include the ‘Important Notice’ (Form 1) on your payment claim – either attached or printed on the reverse.

The ‘Important Notice’ provides the person who is receiving the payment claim their obligations in black and white as to how and when they must make the payment or partial payment and the time frames in which to do so. It also identifies the process of how to challenge all, or part of a payment claim, using a payment schedule that also includes criteria to make it valid.

*NB: we have an educational video under “Training Videos” in the NZCB members’ only Toolshed called, “Contract Exits and Payment Claim” in which Construction Law Specialist, Geoff Hardy from Martelli McKegg Lawyers and his team explain in detail the nine criteria to make your payment valid, and how situations play out if a client defaults on a payment claim.

5. Consider implementing these other practices to aid in the contract running smoothly. • Keep lines of communication open. Regular communication with the progress, delays, and/or variation of the building work with the client will keep them happy and informed on the progress of the build.