Understanding Payment Claims Under the BIFA: Key Insights for Bodies Corporate

When engaging contractors for building work — whether it’s painting, roofing, or large-scale remedial works — bodies corporate and their committees are likely to receive payment claims under Queensland’s Building Industry Fairness (Security of Payment) Act 2017 (BIFA).

While the BIFA is designed to ensure that contractors and subcontractors are paid promptly for their work, it also places strict obligations on respondents who receive payment claims. If your body corporate receives a payment claim and you do not respond correctly and within the required timeframe, you could expose the body corporate to serious financial risks, including losing the ability to dispute amounts claimed.

In this article, we explain how the BIFA system works, what steps a body corporate must take when a payment claim is received, and why early engagement of a project manager or construction expert can help.

What Is the Security of Payment System?

The BIFA provides a system of progress payments to contractors and subcontractors. It enables them to make payment claims for work completed or materials supplied under a construction contract. Under BIFA, the party that receives a payment claim is called the respondent. Importantly, bodies corporate that engage contractors for construction work are respondents under the BIFA if they or their agents receive a payment claim from the contractor.

Key features of the system include:

• A contractor can issue a payment claim at specific times (for example, monthly, or on completion of stages).

• The respondent (in this case, the body corporate) must respond with a payment schedule within a strict timeframe — usually 15 business days after receiving the payment claim (or earlier if the contract specifies).

• The payment schedule must state:

  • The amount the principal proposes to pay (even if it is $0), and

  • Reasons if any part of the claim is being withheld.

If no payment schedule is given and the full amount is not paid by the due date, the contractor can:

• Recover the full amount of the claim as a debt in court, or

• Seek an adjudication determination with only very limited input from the body corporate.

Why It Matters for Bodies Corporate

Bodies corporate often engage contractors for significant construction and remedial work. However, committees and managers, who are typically not construction or legal professionals, may be unaware of the strict response requirements under BIFA.

If a payment claim is overlooked or mishandled, the body corporate may:

• become legally liable to pay the full amount, even if the work is incomplete or defective;

• be unable to raise any defences that might otherwise have been available;

• face court proceedings or adjudication costs, with little ability to defend itself.

This is particularly risky because construction payment claims (which can be in the form of invoices) often involve substantial sums — and committees, who are usually volunteers, are not trained to assess complex building claims.

What to Do When a Payment Claim Is Received

If a payment claim is received under a construction contract:

1. Act Immediately. Record the date the claim was received. The deadline to respond starts running from that date — and is typically 15 business days, unless your contract specifies a shorter time.

2. Review the Payment Claim Carefully. Confirm it meets the formal requirements of a payment claim under the BIFA.

3. Prepare and Deliver a Payment Schedule. If the claim is not being paid in full by the due date, your body corporate must prepare and serve a payment schedule. The schedule must be in writing and must:

4. Identify the payment claim to which it responds (e.g. invoice number or date);

   • State the amount you propose to pay (which may be the full amount, a lesser amount, or nothing); and

   • If you propose to pay less than the claimed amount, provide detailed reasons for withholding payment (such as defective work, incomplete work, or overcharging).

This is not optional — and it is not enough to simply reply by email or wait for the next committee meeting. A proper payment schedule must meet these statutory criteria to be valid.

Consequences of Inaction

If a body corporate fails to serve a valid payment schedule, and does not pay the claimed amount in full by the due date, BIFA imposes severe consequences:

• The body corporate becomes liable for the full amount claimed, even if the work is defective or incomplete (section 77);

• The contractor may recover the amount as a debt in court, without the body corporate being able to dispute it (section 78(2)(a));

• The contractor may apply for adjudication and you may be barred from making submissions regarding the work claimed (section 82);

• The contractor may issue a notice of suspension and lawfully stop work (section 78(3)).

Seek Specialist Assistance

Prompt action, expert advice, and careful management of payment claims are essential to avoid these risks.

Bodies corporate are rarely equipped to assess construction claims on their own. Engaging a specialist construction lawyer, project manager, quantity surveyor, or construction consultant is critical to properly evaluate the work, verify costs, and prepare a defensible payment schedule if required.

The Role of a Project Manager

A project manager can play an essential role in assisting a body corporate with the building aspects during construction. Their duties can include:

• Verifying progress claims: Ensuring that claimed work has actually been completed and meets the required standard.

• Assessing defects or incomplete work: Identifying grounds for withholding payment where appropriate.

• Advising on payment schedules: Assisting the committee or body corporate manager to draft an accurate and compliant response.

• Acting as the body corporate’s representative: Communicating with the contractor on technical issues and managing ongoing contract administration.

Importantly, a project manager’s input provides the technical foundation needed to resist inflated or premature claims — but it must be obtained promptly, so there is time to deliver a payment schedule within the required time.

The Role of a Superintendent under Construction Contracts

In some construction contracts, particularly standard form contracts such as AS 4000 or AS 4902, a superintendent is appointed to administer the contract independently.

The superintendent’s role typically includes:

• Assessing payment claims;

• Certifying the amount payable for work performed; and

• Managing variations and extensions of time.

While a superintendent’s certification is useful, it is important to remember that under BIFA, the body corporate as respondent remains legally responsible for delivering a compliant payment schedule on time.

A superintendent’s assessment should assist in preparing the payment schedule, but it is not a substitute for serving the required documents under BIFA.

Summary

Bodies corporate must be diligent when engaging contractors for building work, as they are subject to the BIFA. Prompt action is critical upon receiving a claim—delays, such as waiting for the next committee meeting, can lead to serious repercussions. Issuing a compliant payment schedule is fundamental to safeguarding your legal rights. While project managers and superintendents can offer valuable support, they do not replace the body corporate’s legal responsibilities. Failure to respond appropriately or missing key deadlines can result in harsh consequences, emphasising the need for proactive and informed decision-making.

Written by Peter Waller – Special Counsel – QLS Accredited Specialist – Commercial Litigation, Grace Lawyers QLD