Securing Payment Through a Subcontractor’s Charge
The Subcontractor’s Charges Act 1974 (“the Act”) allows subcontractors to effectively “leap frog” the contractor (“contractor”) who owes them money and secure a charge over money owed to the contractor by the contractor’s employer (“principal employer”). This means that the principal employer must retain the money owed to the contractor and, in some cases, pay the money directly to the subcontractor.
It is important to note that a subcontractor must choose to either secure a charge under the Act or alternatively make a claim under the Building and Construction Industry Payments Act 2004. A subcontractor cannot use both Acts to obtain payment.
The subcontractor must first serve a Notice of Claim of Charge on the principal employer. This sets out information such as the amount owed to the subcontractor by the contractor and the work that it relates to. The subcontractor must also give notice to the contractor that a claim of charge has been given.
The principal employer must then either retain the money the subject of the charge, or alternatively pay it into court pending resolution of the payment dispute.
The contractor has 14 days to notify the subcontractor whether they accept that the money should be paid or dispute that all or some of the claim is owed. The principal employer (or the court) must then release to the subcontractor the amount accepted as owing.
While a charge under the Act does not guarantee payment in full, it remains a powerful debt collection tool when used appropriately.
When making a subcontractor’s charge it is important to understand the strict time limits provided by the Act, in particular:
- the charge must be lodged no later than 3 months after the work has been completed;
- if the contractor does not agree to payment under the charge, legal proceedings must be commenced within 1 month after the charge has been served.
Our firm can provide assistance in:
- making a subcontractor’s charge;
- responding to a subcontractor’s charge.
Please do not hesitate to contact our office on (07) 4963 2000 or via the contact form below should you have any queries.
Litigation & Dispute Resolution