Overview of SOP Act

Every day, individuals and organisations enter into contracts for building and construction – and sometimes disputes arise over payment.

The Building and Construction Industry Security of Payment Act 2002 (known as the SOP Act) helps ensure that any person who carries out construction work or supplies related goods and services under a construction contract gets paid. It also helps ensure that once construction work is carried out, and goods and services have been supplied, the person who carried out the construction work or supplied related goods and services can have their performance security released to them.

The SOP Act is designed to provide a fast and inexpensive process to recover payments and performance securities due under a construction contract, without the need for lawyers to become involved.

The BPC has several functions under the SOP Act relating to the administration of the Act. But it does not nominate adjudicators or take part in payment disputes. The nomination of adjudicators is the role of Authorised Nominating Authorities (ANAs), who are authorised by us to perform this service.

FAQ

We have collated common questions and answers.

See our Security of Payment FAQ web page.

Overview of the SOP Act

Contracts covered

The SOP Act applies to construction contracts entered into on or after 30 March 2007. For construction contracts entered into between 31 January 2003 and 30 March 2007, the SOP Act applies as if it had not been amended by the Building and Construction Industry Security of Payment (Amendment) Act 2006.

The SOP Act applies to most contracts for building work or for the supply of related goods and services in Victoria. The contract may be oral, written or a combination of both.

Domestic building contracts between a builder or supplier and the home owner are not covered. These come under the Domestic Building Contracts Act 1995. However, contracts between a home owner’s building contractor and any subcontractor or supplier are covered.

Work covered

The SOP Act applies to a broad range of building and construction work, including the following types of work:

• residential and non-residential building
• civil engineering
• demolition
• plumbing
• mechanical air conditioning
• electrical
• professional services (e.g. architecture, design, surveying)
• hire of plant and equipment
• landscaping
• maintenance
• supply of building material.

Types of payments covered

The SOP Act enables contractors to make claims for 'progress payments' for work done or supplies made on and from a date determined by the contract or under the SOP Act.

Statutory right to payment

Contractors have a statutory right to receive progress payments. If the contract does not specify when the contractor is entitled to be paid, the SOP Act sets the date, including when a contract is terminated. Any 'pay when paid' or 'pay if paid' clauses in the contract have no effect.

Entitlement to release of performance securities

Contractors also have a statutory entitlement to the release of a performance security (such as a guarantee, bond or retention money). Similarly to the statutory right to progress payments, the SOP Act enables a contractor to make a claim for the release of performance securities under the SOP Act.

SOP process

1. Payment claims or performance security claims

A person who has carried out work or supplied goods or services under a construction contract in Victoria (the claimant) can claim progress payments by serving a ‘payment claim’ on the contractor, purchaser or client (the respondent).

A payment claim specifies the work, goods or services supplied and the amount claimed and states that it is made under the Building and Construction Industry Security of Payment Act 2002.

A performance security claim specifies the work, goods or services supplied, the type and amount of performance security claimed and states that it is made under the Building and Construction Industry Security of Payment Act 2002.

2. Payment or payment schedule / release or performance security schedule

The respondent can pay in full or, if they dispute the amount due, give the claimant a ‘payment schedule’. A payment schedule states how much the respondent is willing to pay and why it is different from the amount claimed. A respondent who fails to provide a payment schedule within 10 business days of receiving the payment claim or as required by the contract – whichever is earlier – is liable to pay the full amount claimed.

Similarly, a respondent can release the whole amount of the performance security claimed, or if they dispute the claim, give the claimant a ‘performance security schedule’. A performance security schedule states how much of the amount claimed is proposed to be released and the reasons for any difference. A respondent who fails to provide a performance security schedule within 10 business days of receiving the performance security claim or as required by the contract – whichever is earlier – is liable to release the full amount claimed.

3. Adjudication option

If there is a dispute about payment or release, the claimant can apply for adjudication by contacting an Authorised Nominating Authority (ANA). The ANA nominates an adjudicator with the necessary skills and experience to adjudicate the dispute. The adjudicator has 10 business days (after accepting the nomination or after the date the respondent may lodge an adjudication response to determine what amount (if any) the respondent should pay or release, and when. The adjudicator’s deadline can be extended by a further time, not exceeding 20 business days after that period, if the claimant and respondent agree.

4. Court assistance

A claimant may choose to go to court to resolve a dispute rather than apply for adjudication. This is done by lodging a complaint with the Magistrates' Court or a writ in the County Court or the Supreme Court, depending on the value of the claim.

The claimant can also go to court to enforce payment or release of an adjudicated amount. An adjudication certificate is filed in the court, with an affidavit attesting that the respondent has failed to pay or release the adjudicated amount, and the court can issue a judgment for a debt requiring payment or release. Once a court order is made, a claimant can seek enforcement of the debt if it remains unpaid by obtaining a warrant or other order requiring payment or release.

5. Recovery from respondent's principal

In certain circumstances where a respondent has failed to pay or release the adjudicated amount, the claimant may seek payment from the respondent’s principal.

For more information

If you have any questions about SOP, please email us at sopenquiry@bpc.vic.gov.au or call us on 1300 067 088.

Enquiries outside Victoria

Security of Payment regimes operate in all states and territories in Australia. Contact details for the responsible agencies are provided below.

New South Wales
Building Commission NSW
Telephone: 13 32 20

Queensland
Queensland Building and Construction Commission
Telephone: 13 93 33

Western Australia
Department of Local Government, Industry Regulation and Safety
Telephone: 1300 489 099

Northern Territory
Department of the Attorney-General and Justice NT
Telephone: (08) 8924 7608 or 0400 299 652

South Australia
Small Business Commission SA
Telephone: (08) 8303 2026 or 1800 072 722

Tasmania
Department of Justice - Consumer, Building and Occupational Services
Telephone: 1300 654 499

Australian Capital Territory
Land, Planning, Building and Housing
Telephone: 13 22 81