Payment Claims Under The Construction Contracts Act

Mia runs a small electrical subcontracting business in Hamilton. She finishes a rough-in on time, sends her invoice, and then hears nothing for three weeks. The main contractor says the client hasn't paid them yet, so Mia will have to wait.

That kind of cash flow pressure can hit hard, especially when you've already paid staff, bought materials and booked the next stage of work. The good news is that the Construction Contracts Act 2002 gives you a structured way to claim payment and respond when payment is delayed.

A Construction Contracts Act payment claim is more than a normal invoice. If you get the document and timing right, you can protect your payment rights and reduce the chance of a messy argument later.

What Is A Payment Claim Under The Construction Contracts Act?

A payment claim is a written request for payment that meets the requirements of the Construction Contracts Act 2002. It can look like an invoice, but it needs extra information to trigger the Act's payment process.

The Act applies to many New Zealand construction contracts, including contracts for:

• building, altering, repairing, maintaining or demolishing structures
• civil and infrastructure work
• installing services such as electrical, plumbing, HVAC or fire systems
• supplying related goods and services in many construction projects
• some professional services, such as design, engineering and quantity surveying work

The person claiming payment is usually called the payee. The person who must respond or pay is usually called the payer. You might be a head contractor claiming from a principal, or a subcontractor claiming from a builder or head contractor.

The point of the Act is to keep money moving through the construction chain. If you send a valid payment claim and the payer doesn't respond properly, they may become liable to pay the claimed amount, even if they later want to argue about defects, variations or the final account.

There are limits, and the wording of your contract still matters. If you're not sure whether your work is covered, consider a construction contract review before relying on the Act.

When Can You Issue A Payment Claim In NZ?

You can usually issue a payment claim when your contract says you can, such as at the end of each month, at a milestone, or after completing a stage of work.

Your construction contract should set out the progress claim terms, claim dates, the work period covered and the due date for payment. If it does, follow those terms closely. If you claim too early or for the wrong period, the payer may argue the claim isn't valid.

If the contract doesn't say when payment claims can be made, the Act fills the gap. In many cases, you can claim by reference to monthly periods after construction work starts. Your exact position can depend on the type of contract and how the work has been agreed.

Timing also matters when you serve the claim. Check your contract's notice clause before you send it. It may say whether notices can be served by email, post, delivery to a site office or another method.

Keep proof of service, such as:

• the email you sent, with attachments clearly visible
• delivery receipts or read receipts, if available
• courier tracking or hand delivery notes
• a copy of the exact version sent
• the date and time the claim was sent or delivered

Working days matter under the Act. They don't include weekends, New Zealand public holidays and certain holiday periods, so check the calendar carefully, especially around Christmas and New Year.

What Must A Construction Payment Claim Include?

A construction payment claim must include the information required by the Construction Contracts Act, otherwise the payer may argue it doesn't trigger the Act's payment protections.

At a practical level, your payment claim should make it easy for the payer to understand what you're claiming, why you're claiming it, and when payment is due.

Payment Claim Outline

This outline isn't a finished legal document. Our legal team or another suitable legal professional can help tailor it before you use it, because small wording gaps can change the outcome.

1. Claim title: State that the document is a payment claim under the Construction Contracts Act 2002.
2. Parties: Name your business, the payer and any relevant project or site details.
3. Contract details: Identify the construction contract, including the date, project name and scope.
4. Relevant period: State the period or milestone the claim relates to.
5. Construction work claimed: Describe the work, goods or services you're claiming for.
6. Claimed amount: Set out the amount claimed, including whether GST is included or added.
7. How the amount is calculated: Attach a breakdown, schedule of rates, progress percentage, variations and supporting documents.
8. Due date for payment: State the due date under the contract or, if none applies, the Act's default timing.
9. Required information sheet: Include the prescribed information that must accompany payment claims under the Act.
10. Service details: Record how and when the claim is being served.

A common mistake is sending a standard invoice that says only the total amount due. That may be fine for bookkeeping, but it may not be enough as a payment claim under the Act.

If you're claiming variations, make the calculation especially clear. Include variation references, dates, instructions received, rates used and any supporting emails or photos. The clearer the claim, the harder it's for the payer to say they couldn't work out what it related to.

How Does A Payment Schedule Work?

A payment schedule is the payer's formal written response to your payment claim. If they don't agree with the amount claimed, the payment schedule is where they need to say so.

Under the Construction Contracts Act, a payment schedule should:

• identify the payment claim it responds to
• state the amount the payer proposes to pay, called the scheduled amount
• explain how the scheduled amount was calculated
• give reasons if the scheduled amount is less than the claimed amount
• give reasons for withholding payment, such as alleged defects, incomplete work, set-offs or retention deductions

The deadline for a payment schedule is the time stated in the relevant construction contract between the payer and payee. If that contract doesn't set a deadline, the default deadline is generally 20 working days after the payment claim is served.

A separate head contract won't usually set the payment schedule deadline for a subcontract payment claim unless its terms are incorporated into the subcontract.

If the payer serves a valid payment schedule on time, they only have to pay the scheduled amount by the due date for payment, unless the matter is later decided another way. If they don't serve a payment schedule on time, they may become liable to pay the full claimed amount by the due date.

If you're the payer, don't ignore a payment claim because you think it's wrong. Put your response in a proper payment schedule and send it on time. A late response may not protect you.

If you're the claimant, check the payment schedule carefully. Does it arrive on time? Does it identify your claim? Does it explain the reduced amount properly? If not, get tailored advice before deciding your next step.

What Should You Do If A Builder Or Client Hasn't Paid?

If a builder or client hasn't paid, start by checking whether you sent a valid payment claim and whether they served a valid payment schedule on time.

Don't jump straight to stopping work or sending angry emails. The order of steps matters, and getting it wrong can weaken your position.

Step 1: Check Your Documents

Pull together:

• the signed contract, purchase order or accepted quote
• the payment claim and all attachments
• proof of when and how it was served
• any payment schedule received
• emails, site instructions, variation approvals and photos
• your calculation of the unpaid amount

Also check the due date for payment. If the contract doesn't set one, the Act's default timing may apply, often 20 working days after the payment claim is served.

Step 2: Work Out Which Situation You're In

There are usually three possibilities:

• No payment schedule and no payment: The payer may be liable for the claimed amount on the due date.
• Payment schedule served, but scheduled amount unpaid: The payer may be liable for the scheduled amount.
• Payment schedule served for a lower amount: The scheduled amount may still need to be paid, while the difference may need to be dealt with through the Act's dispute process.

The Act also deals with suspension rights. In some cases, if the payer hasn't paid the amount due, you can give written notice of your intention to suspend work. The notice usually needs to give at least 5 working days before suspension can start.

Suspension is a serious step. Before you stop work, get specialist NZ construction disputes advice, because your contract, safety obligations and project circumstances may affect what you can do.

What Does This Look Like In Practice?

Here's a simple example.

Mia's electrical business completes a stage of work worth $12,000 plus GST. Her subcontract doesn't state a payment schedule deadline or a payment due date. She serves a valid payment claim by email on Monday 3 March, and the contract allows notices by email.

Assuming there are no relevant public holidays affecting the count, the 20 working day deadline falls on Monday 31 March.

That means:

• the head contractor should serve any payment schedule by Monday 31 March
• if no payment schedule is served, the claimed amount is due on Monday 31 March
• if the head contractor serves a payment schedule for $9,000 plus GST, they need to explain why the other $3,000 isn't being paid
• if the scheduled amount is $9,000 plus GST, that amount should be paid by the due date

If the head contractor says they can't pay because the principal hasn't paid them, that usually isn't enough. Pay when paid provisions generally don't get around the Act.

If no payment schedule arrives and no payment is made, Mia can consider the Act's next steps, including a written suspension notice and adjudication. She should get advice before acting, especially if the project is ongoing or the other side alleges defects.

Common Mistakes To Avoid

The most common mistakes are usually document and timing mistakes, not complicated legal arguments.

Watch out for these:

• Calling any invoice a payment claim: An invoice won't automatically count unless it includes the Act's required information.
• Leaving out the Act wording: Your claim should clearly state that it's made under the Construction Contracts Act 2002.
• Forgetting the prescribed information: The required information sheet should accompany the payment claim.
• Using unclear calculations: Break down labour, materials, margins, variations, retentions and GST so the payer can follow the numbers.
• Serving it the wrong way: If your contract requires service at a specific email or address, use that method and keep proof.
• Missing the payment schedule deadline: If you're the payer, a late payment schedule can leave you exposed to the full claimed amount.
• Ignoring retentions: If retention money is being withheld, your documents should line up with the Construction Contracts Act retention money rules.
• Stopping work too early: Suspension usually requires a valid unpaid amount and written notice. Get advice first.

Templates can be a useful starting point, but construction payment documents work best when they're tailored to your contract, project and billing process. A clause that works for a monthly subcontract may not work for a milestone-based design engagement.

If you issue payment claims often, set up a repeatable process. Use the same checklist each month, diarise deadlines and save every claim in a project folder with proof of service. That simple admin habit can save a lot of stress later.

Key Takeaways

• A payment claim under the Construction Contracts Act 2002 needs more detail than an ordinary invoice.
• Your claim should identify the contract, work, period, amount claimed, due date and calculation method, and state that it's made under the Act.
• If the relevant construction contract between the payer and payee doesn't set a payment schedule deadline, the default deadline is generally 20 working days after service.
• If the payer doesn't serve a valid payment schedule on time, they may become liable for the full claimed amount.
• If payment isn't made, check your documents first, keep clear records and get advice before suspending work or starting an adjudication process.
• Clear payment claim and payment schedule templates can help protect your cash flow and reduce arguments on each project.

If you'd like help with construction payment claims, progress claim wording, payment schedule templates or construction contract terms, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.