Client won't pay? Your options as a tradesperson in NSW

Being out of pocket for work you have done is one of the most stressful parts of running a trade business. The good news is you have several options in NSW, and some of them are fast. This guide sets them out in the order we usually work through them.

Start by getting your paperwork straight

Before you chase the money, get your evidence in order. Pull together the contract or quote, the variations, the invoices, your records of the work, and any messages where the client approved the job or the changes. The strength of your paperwork decides how quickly this resolves.

The single most common reason we see a good claim run into trouble is poor records, especially on variations. Work approved by a text message or a nod on site, then disputed later, is hard to prove. Confirm variations in writing as you go. It takes a minute and it protects thousands.

Step 1: A clear reminder and a letter of demand

Often the first formal step is a letter of demand. It sets out what is owed, for what, and gives a firm deadline to pay, usually 14 days, with a clear statement of what you will do next if it is not paid. Many disputes settle at this point, because the client sees you are serious.

A letter on a solicitor's letterhead tends to carry more weight than another invoice. There is a separate article in this series on letters of demand.

Step 2: The Security of Payment Act

For construction work, the Security of Payment Act is often your best tool. It gives you a statutory right to progress payments and a fast adjudication process to enforce it, without a drawn-out court case.

In short, you serve a payment claim, the client has a limited time to respond with a payment schedule, and if they do not pay you can go to adjudication, where an independent adjudicator decides how much is payable, usually within tight timeframes. This is frequently the quickest route to the money for a tradesperson, which is exactly why the Act exists. There are separate articles on how the Act works and how to make a payment claim.

A caution we give clients. The Act is powerful but technical, and the deadlines are strict. Used well it is fast. Used carelessly, a claim can be knocked out on a technicality. It is worth getting the first claim right.

Step 3: Court

If the Security of Payment Act does not fit, or the debt is not for construction work, you can sue in court. For most trade debts, that means the NSW Local Court.

The Local Court hears civil claims up to $100,000. Claims up to $20,000 go to the Small Claims Division, which is quick and informal and designed to be used without a lawyer. Claims over $20,000 and up to $100,000 go to the General Division. Larger claims go to the District Court. You generally have 6 years from when the debt became due to sue, so do not sit on an old debt.

Step 4: Home Building Act and licensing issues

Residential building work carries extra rules under the Home Building Act, including licensing and contract requirements. These can affect your right to recover, so if the work is residential, it is worth checking your position early. Disputes about residential building work can also go to NCAT, the NSW Civil and Administrative Tribunal.

A hard truth worth knowing up front. If the work required a licence and you were not properly licensed, your right to be paid can be affected. This is one of the first things we check on a residential job, because it changes the strategy.

How we help

Most unpaid-work matters do not need a courtroom. The right letter, or a well-made payment claim, resolves many of them. Where it does go further, having chosen the right path from the start, Security of Payment, Local Court, or NCAT, makes a real difference to how fast and how cheaply it ends. We can look at your paperwork and tell you the quickest route for your situation.

Frequently asked questions

What is the fastest way to get paid for building work? For construction work, the Security of Payment Act is usually the fastest route, because adjudication is quick and the deadlines are tight.

How much can I claim in the Local Court? Up to $100,000, with claims up to $20,000 in the quick Small Claims Division.

How long do I have to chase an unpaid invoice? Generally 6 years from when the debt became due, though acting sooner is always better.

Does it matter if the work was residential? Yes. Residential building work has extra rules on licensing and contracts that can affect recovery, so get advice early.

Keep reading

• Tradespeople
• How to make a payment claim under the Security of Payment Act
• Letter of demand: when and how to send one

This article contains general information only and is not legal advice. For advice about your situation, please contact us. Liability limited by a scheme approved under Professional Standards Legislation.