Rebecca Richter, Lawyer, Ford Sumner Lawyers
Cashflow is king for any small contractor — yet late payments or clients who don’t pay at all can cripple your business.
But one powerful tool can help protect your cash flow – making sure your invoices are valid payment claims under the Construction Contracts Act 2002 (CCA).
Do you have small debts from the past 6 years that you haven’t bothered chasing because you thought it was uneconomic? Read on – there is a cost-effective solution right at your door!
Understand the Power of the Construction Contracts Act
The CCA uses the mantra “pay now, argue later” to help keep cashflow flowing and is designed to make sure contractors, subcontractors, and suppliers get paid on time.
If you serve a valid payment claim, the customer must either pay you by the due date or issue a payment schedule explaining why they’re not paying in full. If they don’t, you can take enforcement steps — including fast-track adjudication or even summary judgment.
Follow the two steps below to take charge of this debt recovery process.
Step 1 – Make Sure Your Invoice Ticks All the Boxes
A normal invoice might not be enough. To be a valid payment claim, it must:
- Be in writing – this can look like an invoice;
- Identify the construction contract — e.g. “This claim relates to Contract XYZ dated 1 June 2025.” or “this contract related to Project XYZ”
- Identify the work done and the amount claimed relating to that work.
- State the due date for payment under the contract or the default date under the Act.
- Include the prescribed CCA notice — a clear statement that says:
“This is a payment claim made under the Construction Contracts Act 2002.” - Include the Form 1 notice — a copy of the Form 1 information sheet from the Regulations, which explains the payer’s rights and obligations. This is commonly left out by contractors — so make sure you include it.
If you miss any of these, you may not be able to rely on the protections of the Act!
Step 2 – Wait for a response or payment
After issuing a compliant payment claim, a payment schedule is due either;
- Within the timeframe set out in your contract; or
- 20 working days after the payment claim is served (if your contract doesn’t say).
If the customer fails to pay the amount sought in the payment claim or respond with a payment schedule within the required timeframe, the amount in the payment claim becomes due and payable.
Consequences – what happens if no payment and no payment schedule
This is where the power to the CCA is fully realised. If the customer fails to pay or respond with a complaint payment schedule, then the amount set out in the payment claim becomes due and owing and you can claim actual and reasonable legals cost under the CCA. This can become super charged if you also have contractual clauses that entitle you to charge interest and recover debt collection costs – see part 1 of this article.
You will also have the ability to suspend your works. Which is an effective tool to encourage payment.
So how is this cost-effective for me?
With the clear ability to claim legal costs from the debtor, you are in a much stronger position to push for payment of the debt with legal assistance.
Ford Sumner offers a cost-effective dispute resolution process to recover such debts, meaning claims, no matter how small, are worth while pursuing.
6. What should I do next
Go through all of your bad debts, even if they are years old (but not no more than 6 years old) and get in contact with us. A handful of small debts can add up to a significant sum.
You can re-issue old invoices as new payment claims, and follow the above process. Our team can help you ensure your invoices comply with step 1 at no cost to you. Feel free to reach out with any questions – we are here to help you get paid!
If you would like further or more specific advice on construction related issues, or any other legal issue, get in touch with Ford Sumner and its division of Tradie Law for help at 04 910 3200 or email helpdesk@tradielaw.co.nz.