Key takeaways
- In NSW, a builder’s first formal move on a residential job is a payment claim that meets the requirements of the Building and Construction Industry Security of Payment Act 1999, not a letter demanding payment.
- The contract you signed determines your right to suspend work, charge interest and recover debt recovery costs, so those clauses are worth reading before you down tools.
- Adjudication under the Security of Payment Act is an interim process: it produces a fast, enforceable decision on the amount payable, not a final ruling on every dispute between the parties.
- Doing defective or incomplete work is not excused by non-payment, and a homeowner with a genuine defence will use your own defects list against you in any escalation.
- The longer you wait to serve a valid payment claim, the more the debt looks like a commercial dispute rather than a statutory entitlement, and the harder it is to recover.
A homeowner who refuses to pay is a cashflow problem before it is a legal one. On a residential job, you have subbies to pay, materials accounts running, and a programme that does not pause just because the last progress payment did not arrive. The instinct is to send a strong email, then a stronger one, then to stop work. That sequence often costs more than the debt itself.
NSW gives residential builders a specific escalation pathway under the Building and Construction Industry Security of Payment Act 1999. It is not a general debt recovery process and it is not a substitute for a well-drafted contract. It is a statutory mechanism for getting an interim decision on what you are owed, quickly, so that the job does not stall while the parties argue about everything else.
This article sets out that pathway in order: what to check before you do anything, how to serve a payment claim that will stand up, what happens if the homeowner responds or does not, when adjudication is worth the fee, and how to protect your position in the meantime. It assumes the dispute is about non-payment on a residential job, not about whether the company you contracted with is solvent. Those are different problems with different tools.
Before you escalate, read the contract you actually signed
Most of the leverage you have in a non-payment dispute was created or given away when the contract was signed. The back charges and subcontractor disputes include payment terms, but the detail that matters in a fight is usually in the special conditions or the progress payment schedule. Before you send a payment claim, find the clauses that deal with four things: when payment falls due, what interest applies to late payment, whether you can suspend work for non-payment, and how disputes are to be notified.
If your contract has a progress payment schedule, check that the claim you are about to make matches a stage that has actually been reached. A claim for a stage that is not complete gives the homeowner a genuine defence and hands them the moral high ground. If your contract has no schedule and payment is on account, the position is less certain and the payment claim needs to be drafted more carefully.
This is also the moment to check whether the contract is a residential building contract under the Home Building Act, because the dispute resolution and payment provisions differ from commercial contracts. If you are unsure which regime applies, that is a question worth putting to your solicitor before you serve anything, not after.
Serve a payment claim that meets the Act, not just a demand letter
The single most common reason a builder loses a Security of Payment argument is that what they served was not a valid payment claim. A demand letter, an invoice, or a text message saying “pay up or I stop” is not a payment claim under the Act. The NSW Government guidance on making a payment claim sets out what the claim needs to contain and how it must be served.
The claim needs to identify the construction work or related goods and services, state the amount claimed, and be served in the way the Act requires. It should also be clear that you are serving it under the Security of Payment Act, because that is what triggers the homeowner’s obligation to respond with a payment schedule. If you do not trigger that obligation, you have not started the clock.
Service matters as much as content. If the contract specifies a method of service, use it. If you serve by email, keep the delivery confirmation. If you serve by hand, note the date, time and who received it. If the homeowner later claims they never received the claim, you want a record that shows otherwise.
The escalation pathway for a non-paying homeowner
- 1Check the contractConfirm what it says about progress payments, interest, suspension and notice before you send anything.
- 2Serve a payment claimIssue a claim that meets the requirements of the Security of Payment Act, with the supporting detail the contract and the Act call for.
- 3Wait for the payment scheduleThe homeowner has a set period to respond with a payment schedule; if none arrives, the position changes in your favour.
- 4Consider adjudicationIf the schedule undercuts you, an adjudicator can determine the amount payable on an interim basis.
- 5Enforce or suspendUse the adjudication certificate, or exercise the suspension right the contract gives you, rather than continuing to work on credit.
What happens when the homeowner responds with a payment schedule
A payment schedule is the homeowner’s formal response to your claim. It states what they propose to pay and, if they propose to pay less than the claimed amount, why. A schedule that simply says “not paying” without reasons is weak. A schedule that sets out specific defects, incomplete work or variations it disputes is a serious document and tells you what you will be arguing about.
Read the schedule as a map of the homeowner’s case. If they are withholding for defects, you need to decide whether to fix the defects and re-claim, or to dispute the withholding. If they are withholding for a variation they say was never agreed, you need the written variation or the paper trail that shows agreement. If they are withholding because they say the work is not to standard, the dispute is now about quality, and non-payment is a symptom rather than the cause.
If you receive a payment schedule that undercuts you, you have a choice: accept the amount and keep working, negotiate, or apply for adjudication on the difference. That choice is commercial. Adjudication costs money and takes time, and it is usually worth it only where the disputed amount is large enough to justify the process and the homeowner’s reasons are weak.
If no payment schedule arrives, your position changes
Where a homeowner does not serve a payment schedule within the period the Act allows, they lose the right to raise most defences to the claim. That does not mean the money appears. It means the amount claimed can be treated as due, and you can apply for adjudication or enforce it as a debt. This is the point at which many builders discover that a valid claim served properly is worth more than a year of polite emails.
The trap is that builders often keep working through the non-response period, hoping the relationship will recover. It rarely does. The longer you work without payment, the larger the debt becomes and the more the homeowner has to lose by paying. The Act gives you a statutory right to suspend work for non-payment, but only if you follow the process the Act and the contract set out. Suspending without notice, or suspending when the contract does not allow it, can turn you into the party in breach.
The NSW Government overview of Security of Payment is a useful check on the sequence, but the detail that governs your job is in the Act itself. The Act is not long, and the sections on payment claims, payment schedules and suspension are worth reading before you act, not after.
What happens after you serve a payment claim
- Claim servedYou issue a payment claim for work done, setting out the amount and the basis for it.
- Response windowThe homeowner either serves a payment schedule or lets the window pass without responding.
- Adjudication applied forYou apply for adjudication and an adjudicator is appointed to decide the amount payable.
- Determination receivedThe adjudicator issues a determination, which is enforceable as a debt in the courts.
- EnforcementYou take the determination to court for enforcement if payment still does not arrive.
Adjudication: what it is and what it is not
Adjudication under the Security of Payment Act is an interim process. An adjudicator decides the amount payable on the payment claim, based on the claim and the payment schedule and the submissions the parties make. It is not a court, it is not a final determination of every issue between the parties, and it does not stop the homeowner from later suing you over defects. What it does is produce a decision that can be enforced as a debt, usually within a much shorter timeframe than litigation.
To apply for adjudication, you need to lodge an application in the form the Act requires, with the payment claim and any payment schedule, and pay the fee. The adjudicator is appointed, the parties make submissions, and a determination is issued. If the homeowner does not pay, you can take the determination to court and enforce it. This is the part of the pathway that actually converts a statutory entitlement into money.
Adjudication is not free and it is not risk-free. If you lose, you have spent the fee and you still have a non-paying homeowner. That is why the decision to adjudicate should turn on the strength of your claim and the size of the debt, not on frustration. A claim for a small amount is usually better pursued through negotiation or, if necessary, a debt recovery process, because the cost of adjudication can exceed the amount recovered.
Suspension, interest and the cost of getting the sequence wrong
The most expensive mistake in a non-payment dispute is not the refusal to pay. It is the builder’s reaction to it. Walking off site without following the contract’s suspension provisions can be treated as repudiation, which lets the homeowner terminate and claim the cost of completing the work. Sending a claim that does not comply with the Act can waste the statutory window. Continuing to work while unpaid, because you do not want to “make it awkward”, converts a statutory entitlement into an unsecured commercial debt.
The mistake that costs the most. Many builders treat a payment claim as a formality and serve it late, or serve an invoice instead. The claim is the document that starts the statutory clock, and if it is defective or late, the fast pathway closes and the debt becomes an ordinary commercial dispute.
Interest is the other lever. If your contract sets a rate for late payment, claim it. If it does not, the Act may imply a rate, but you need to check the current position and the contract terms. Interest is not usually the reason a homeowner pays, but it changes the arithmetic and it signals that you are running a process rather than making a complaint.
Your contract may also allow you to recover debt recovery costs, including legal fees, if you have to chase payment. That clause is worth having and worth using. Without it, the cost of recovery eats into the debt, and on a small job it can consume it entirely.
What a well-run non-payment file looks like
The builders who recover money in these disputes are not the ones who shout loudest. They are the ones whose paperwork is in order before the dispute starts. That means a written contract with a clear progress payment schedule, variations signed before the work is done, and a habit of serving payment claims on time for every stage, not just the disputed one.
When a homeowner stops paying, the file you want to be able to produce includes: the contract and any special conditions; the progress payment schedule; all variations, signed; the payment claim and proof of service; any payment schedule received; correspondence about the disputed items; and photographs or inspection records showing the state of the work. If you have those, adjudication or enforcement is a process. If you do not, it is an argument.
It is also worth checking whether the homeowner has a legitimate reason to withhold. Defective work, incomplete work and unapproved variations are the three most common defences, and all three are within your control. A homeowner who owes you money but has a genuine defects claim is not really a non-payment dispute; it is a defects dispute with a payment problem attached. Fixing the defects may be the fastest route to payment.
Worked example: a builder in western Sydney
A builder in western Sydney is carrying out a first-floor addition under a written residential building contract with a progress payment schedule. The schedule provides for a payment at frame stage and another at lock-up. The frame is complete and inspected. The builder serves the frame stage claim. The homeowner does not pay and does not serve a payment schedule. Instead, the homeowner sends an email saying the frame is “not right” and that they will not pay until their own inspector has looked at it.
The builder’s first instinct is to stop work and send a demand. That would be a mistake on two fronts. First, stopping work without following the contract’s suspension provisions risks putting the builder in breach. Second, the email is not a payment schedule, so the homeowner has not engaged with the statutory process at all. The builder’s position under the Act is actually stronger than it looks, provided the claim was valid and served properly.
The better sequence is: check the claim and the proof of service; confirm the contract’s suspension clause and notice requirements; write to the homeowner noting that no payment schedule has been received and that the amount claimed is now due; and, if payment does not arrive, apply for adjudication. In parallel, the builder should deal with the “not right” allegation on its merits, because if the frame genuinely has a defect, the homeowner will raise it in the adjudication and the builder will need an answer.
If the adjudicator determines the amount payable and the homeowner still does not pay, the builder enforces the determination as a debt. At that point the dispute is no longer about whether the homeowner feels like paying. It is about a court enforcing a statutory decision. That is the outcome the escalation pathway is designed to produce, and it is available only to builders who serve the right document at the right time.
Prevention is cheaper than adjudication
Every non-payment dispute is easier to resolve if the contract was clear at the start. A progress payment schedule that ties payments to stages that can be objectively verified removes most of the argument about whether a stage is reached. A variation clause that requires written agreement before work proceeds removes the argument about whether a variation was approved. A clause that sets interest and recovery costs changes the homeowner’s arithmetic when they decide whether to withhold.
The NSW Government guidance on contracts for home building work is a useful starting point, and the changes you have to notify goes into how to structure them so that each payment is tied to a verifiable stage. Getting that right at quoting and contracting stage is worth more than any dispute strategy.
For builders who want to sharpen their contract and payment practice, the guide to how NSW builder CPD works explains how the compliance and business units fit together, and the PointCPD course catalogue lists the relevant courses. The cost of a course is trivial next to the cost of a job where you cannot get paid.
Questions builders ask
What is the first step when a homeowner refuses to pay in NSW?
Check the contract for payment terms, interest, suspension and dispute notice provisions, then serve a payment claim that complies with the Security of Payment Act. A demand letter or invoice is not a payment claim and will not start the statutory clock. The claim needs to identify the work, state the amount and be served in the required way.
Can I stop work if the homeowner has not paid?
You may be able to suspend work for non-payment, but only if you follow the process in the Security of Payment Act and the contract. Suspending without the required notice, or where the contract does not allow it, can put you in breach and expose you to a claim for the cost of completing the work. Read the suspension clause before you down tools.
What happens if the homeowner does not serve a payment schedule?
If no payment schedule is served within the period the Act allows, the homeowner loses the right to raise most defences to the claim. The amount claimed can be treated as due, and you can apply for adjudication or enforce it as a debt. This is why proof of service of the payment claim matters so much.
Is adjudication the same as going to court?
No. Adjudication under the Security of Payment Act is an interim process that decides the amount payable on a payment claim. It is faster and cheaper than litigation, but it does not finally determine every issue between the parties. If the homeowner does not pay, you enforce the determination as a debt in court.
Can a homeowner withhold payment for defects?
A homeowner can raise defects as a reason to pay less, and a genuine defects claim will be considered in adjudication. If the work is defective or incomplete, fixing it is often the fastest route to payment. A defects dispute with a payment problem attached is not the same as a straightforward refusal to pay.
How do I protect myself against non-payment before the job starts?
Use a written contract with a clear progress payment schedule tied to verifiable stages, require written variations before work proceeds, and include clauses for interest and recovery costs. Serve payment claims on time for every stage, not just the disputed one. Good paperwork at the start is the cheapest protection available.
Sources
- About Security of Payment for construction contractors · NSW Government
- Building and Construction Industry Security of Payment Act 1999 (NSW) · NSW Legislation
- Making a payment claim under Security of Payment laws · NSW Government
- Contracts for home building work · NSW Government · 2026-04-29
Published 21 July 2026. General information for builders, not legal, financial or engineering advice for a specific job. Check current requirements with the relevant regulator or standard before relying on them.
