Progress Claims under your Construction Contract

There are a number of laws relating to how much your builder can charge for progress claims under your construction contract. It is very important to remember that you should never pay in advance of the works completed on site; this could put your project at risk.

Progress claims are designed to keep the job moving and allow cashflow to the builder. Your construction contract will likely state that you the owner have an obligation to pay the progress claims as and when they fall due, so it is important that you understand that you will be making a number of payments to the builder throughout construction.

Deposit Limits

In every State of Australia there are rules regarding the deposit limits that can be charged by a builder. The deposit is usually charged by the builder upon signing of the construction contract. In most contracts, the deposit is limited to five percent (5%) of the contract price. It is very important to check your construction contract prior to signature so that you know and understand the progress claims set out for your job.

Progress Payment Schedule

Your construction contract will likely have a standalone schedule at the front setting out the progress payments for your job. This will likely be a table that will set out the progress claims or milestones that must be reached and the percentage of the contract price that is to be paid at that milestone. Most contracts give the owner five (5) days to pay the progress claim after receiving an invoice from the builder.

It is important to speak to your bank prior to commencement about their processes for releasing money, as some banks may insist on sending out a valuer at each progress stage and this may delay payment. This may place you the owner in breach of contract if payment of the progress claim is delayed.

Under the table there will likely be definitions of the milestones and exactly what these mean. You may see terms such as ‘fixing stage’, which is the stage when all internal lining, architraves, cornice, skirting, doors to rooms, shower trays, wet area tiling and cupboards are installed. The wording in your contract may vary slightly but it is important you understand what the milestones under the contract are.

The builder may come up with their own definitions/milestones under the contract and this is generally acceptable as long as the progress claims are defined at the time of entering into the contract. There are strict rules regarding the builder not being able to charge in advance of works done, so it is important that you are aware of the progress stages under your contract. If there are any items you do not understand within the contract then firstly speak to your builder and also obtain legal advice from a construction lawyer.