Many building contracts have an agreed price for the whole of the work with payments made when the house reaches certain stages – slab, plate height, lock-up – and so on. Usually the builder makes a progress claim which needs to be settled within a specified time period or else penalties and interest can apply for late payment.
When there is a dispute over a progress claim the contract may state the process for dispute resolution. One relatively unknown process is a process of rapid adjudication under the Construction Contracts Act. This process has been introduced only in recent years to provide greater security of payment in the building industry.
Under this legislation, either the builder or homebuyer can submit a payment dispute to an independent adjudicator. The adjudicator assesses the claim and gives a binding determination of who should pay, and how much.
This adjudication process is designed to get a rapid resolution of payment issues. The Act sets strict time limits to allow decisions to be made quickly with payments not held up by lengthy disputes.
For example, an application for adjudication must be lodged within 28 days of the payment dispute arising. In addition when a claimant lodges a dispute, the respondent has 14 days to respond. The adjudicator is then required to make a decision within a further 14 days.
It is important that all parties to a building contract have a suitable security of payment mechanism providing rapid adjudication of payment disputes.
For further information of the Construction Contracts Act look at the website of the Department of Housing and Works www.dhw.wa.gov.au.