Getting paid as a subcontractor: payment claims under the Construction Contracts Act

What makes a valid payment claim

The Act applies to every contract for construction work in New Zealand, whether it is written, oral or a mix of both, and nobody can contract out of it. It does not apply to someone doing the work as an employee, so a labour-only subcontractor who invoices is covered and a builder on wages is not.

You can serve a payment claim at the end of each period your contract sets. If the contract is silent, section 17 gives you monthly progress periods: from the day you first worked on the job to the end of that month, then each month after. Section 20 says the claim must:

• be in writing;
• give enough detail to identify the construction contract;
• identify the work and the period the payment is for;
• state the amount claimed and the due date for payment;
• show how you calculated the amount; and
• state that it is made under the Construction Contracts Act 2002.

It must also be sent with a written outline of how to respond and what happens if the payer does not respond or does not pay. That outline is prescribed: it is Form 1 in the Construction Contracts Regulations 2003, an "Important notice" that explains the payment schedule, the deadlines and the consequences in plain words. Attach it to every claim. The regulations allow a claim to be served by email if the payer consents to electronic communication, which can be inferred from how you usually deal with each other.

An ordinary invoice is not a payment claim unless it has all of this. Our guide to invoicing as a contractor covers what an invoice must show and how to chase a late payment; a payment claim needs those details and the statutory ones together.

The payment schedule: 20 working days unless the contract says otherwise

A payer who disagrees with your claim answers it with a payment schedule. Under section 21 it must be in writing, identify your claim and state the amount the payer will pay, which can be nothing. If that is less than you claimed, it must say how the payer worked it out, why it differs, and why anything is being withheld.

Section 22 sets the deadline: the time in your contract or, if the contract says nothing, 20 working days after the claim is served. Miss it, and the payer becomes liable for the full claimed amount on the due date. The due date is the one in your contract; if there is none, section 18 makes payment due 20 working days after the claim is served.

Working days are defined in section 5. They leave out weekends, the public holidays the Act lists, your provincial anniversary day, the Monday after a Waitangi Day or Anzac Day that falls at the weekend, and, for these deadlines, everything from 24 December to 5 January. A claim served just before Christmas therefore runs well into January.

If no schedule arrives in time and the due date passes unpaid, section 23 lets you recover the unpaid amount as a debt in any court, with your actual and reasonable costs of recovery, and serve notice that you intend to suspend work. Section 24 gives the same remedies when the payer sends a schedule but does not pay the scheduled amount. If you are still unpaid 5 working days after a notice to suspend, section 24A lets you stop work without being in breach of the contract, without liability for the other party's losses, and with an extension of time to finish.

Two more protections sit behind all of this. Section 13 strips "pay when paid" and "pay if paid" clauses of any effect, so a head contractor cannot hold your money until its own client pays. And section 12 means a contract cannot sign these rights away.

Retentions held on trust since the 2023 changes, and checking yours

Retentions are the part of each payment a head contractor holds back as security for your work. On a commercial job, meaning no party to the contract is the residential occupier, subpart 2A of the Act makes that money trust property from the moment the contract allows it to be held, whether or not it has actually been taken off your payments.

The Construction Contracts (Retention Money) Amendment Act 2023 tightened the rules from 5 October 2023. The head contractor must:

• put retention money in a bank account at a New Zealand registered bank used only for retention money, as soon as practicable, or hold a complying instrument such as insurance, a bond or a guarantee that will pay you if it does not;
• keep records of all retention money held for you and let you inspect them at reasonable times, free of charge; and
• report to you as soon as practicable after money is retained and at least once every 3 months: each amount, the contract and date, the total held, and the bank account or instrument details.

Failing to keep retention money as required is an offence with a fine of up to $200,000 for each offence, and each director of a company that fails can be fined up to $50,000. Failing to keep the records or send the reports carries up to $50,000 for each offence. Retention money is not available to the head contractor's other creditors.

The Act also voids contract terms that make release of your retentions depend on anything except your own performance, push release later than when you have done everything required of you, or charge you fees for administering them. Money can be used to fix defects only where the contract allows it and after at least 10 working days' written notice to you. Interest is payable on retentions released late.

To check yours, compare each quarterly report with your own claims: what each claim was, what was retained from it, and the running total. If no report arrives, ask for one in writing.

Adjudication and recovery as a debt when the claim is ignored

When a payer ignores a valid claim, the court route under section 23 turns on a narrow question: was the claim valid, was no schedule given in time, and was the money not paid. The court must be satisfied of those things before giving judgment.

For anything that is genuinely disputed, section 25 lets any party refer the dispute to adjudication, even while it is before a court. The steps are set by the Act:

1. You serve a notice of adjudication on the other party, then refer the dispute to an adjudicator.
2. The other party has 5 working days to respond, from receiving your claim or the adjudicator's acceptance, whichever is later.
3. The adjudicator decides within 20 working days after that, or 30 if they need more time, or longer if both parties agree.
4. An amount the adjudicator orders is due 2 working days after the determination is given, unless the adjudicator sets a later date.

If it is not paid, section 59 lets you recover it as a debt, give notice that you will suspend work, or apply to have the determination entered as a judgment. A determination stays binding even if the other party starts judicial review or other proceedings. Each party usually meets its own costs, unless the adjudicator finds the other side acted in bad faith or raised objections without substantial merit.

Backing each claim with daily hours, variations and materials

Section 20 requires you to show how you calculated the claim, and section 17 values progress work by the contract price and rates, plus authorised variations, less the cost of fixing any defects. So the detail behind each claim is what a payment schedule will argue with, and records made on the day give you that detail.

Record, for each job and each day:

• the hours worked and who worked them;
• every variation: what was asked for, who asked, when, and the hours and materials it took;
• materials bought for the job, with the receipts kept against it; and
• delays you could not control, such as waiting on other trades or access.

Your Timesheets at jobtracker.co.nz logs your hours free on every plan: each job can be its own place, a day takes a start, finish, break and note, and every change is kept in the entry's history, which helps when a payer questions a figure. With the Career and Timesheets plan, a job can carry projects and tasks for each variation, with your rates, reports and invoices with GST, as a PDF or Word file you send yourself. An invoice becomes a payment claim only once it has everything section 20 requires, including the statement that it is made under the Act and the Form 1 notice attached. For the tax side of each payment, our guide to contractor tax covers schedular tax, GST and what to set aside.

Keep each job's hours ready to claim