Guides / Building and trades
Unpaid on a building job: payment claims and letters of demand
If you work in building or construction in Victoria and have not been paid, you may have two routes: a payment claim under the Security of Payment Act, or a letter of demand. They work very differently. This guide explains the difference at a high level, including changes that started on 15 April 2026.
Two different tools
A letter of demand can be used for any debt. There is no set form, you choose the deadline, and nothing special happens if it is ignored.
A payment claim is a document under the Building and Construction Industry Security of Payment Act 2002 (Vic). It applies to construction work, and related goods and services, under a construction contract, whether the contract is written, oral or both. It comes with a strict timetable and real consequences for a party that does not respond properly.
The numbers to know
10 business days
The other party can respond with a payment schedule saying how much it will pay and, if it is less than the claim, why. If it does not serve a schedule within the time in the contract or 10 business days, whichever ends first, it becomes liable to pay the full amount claimed on the due date.
How a payment claim works
20 business days
A contract can set when a progress payment is due, but a term that makes payment due more than 20 business days after a payment claim has no effect.
How a payment claim works
6 years
You can still send a letter of demand and, if needed, sue on the contract. The general time limit for that is six years.
Common questions
How a payment claim works
A payment claim must identify the work or goods and services it covers, state the amount claimed, and state that it is made under the Act.
The other party can respond with a payment schedule saying how much it will pay and, if it is less than the claim, why. If it does not serve a schedule within the time in the contract or 10 business days, whichever ends first, it becomes liable to pay the full amount claimed on the due date.
If no schedule is served and the money is not paid, you can:
- sue for the unpaid amount as a debt, and in that case the other party cannot bring a cross-claim or raise defences arising under the contract; or
- apply for adjudication, after first giving notice of that within 10 business days after the due date (the other party then has 5 business days to serve a schedule); and
- give notice that you intend to suspend work.
If a schedule is served but proposes to pay less than you claimed, you can apply for adjudication within 10 business days after you receive it. If the scheduled amount is not paid by the due date, you can sue for it as a debt or apply for adjudication, and give notice that you intend to suspend work.
A contract can set when a progress payment is due, but a term that makes payment due more than 20 business days after a payment claim has no effect. Interest runs on an overdue progress payment.
What changed on 15 April 2026
The Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 (Vic) changed the Act from 15 April 2026. Among the changes:
- the former “excluded amounts” provisions, which limited what a payment claim could include, were repealed;
- a payment claim may now be served from the last day of each month in which work was done or goods and services were supplied, and generally only one claim per month;
- days from 22 December to 10 January no longer count as business days under the Act;
- a payment claim must generally be served before the date six months after practical completion of all the work (or six months after the last supply of related goods and services, if later), unless the contract allows a later date.
The changes apply to contracts made before or after 15 April 2026, but the new payment claim and adjudication rules generally do not apply to a payment claim served before that date.
When a letter of demand fits better
A letter of demand is usually the right tool when:
- the Act does not apply to your contract, for example a contract directly with a home owner (see below);
- the time to serve a payment claim has passed;
- the debt is not for construction work or related goods and services.
If you want the Act’s timetable to apply, the document must meet the Act’s requirements, including the statement that it is made under the Act. An ordinary letter of demand does not start that timetable.
Building work on a home
The Act generally does not apply to a domestic building contract between a builder and a home owner, unless the owner is in the business of building homes. A subcontract with a builder for work on a home may still be covered.
A dispute between a home owner and the builder about payment for domestic building work is a “domestic building work dispute” under the Domestic Building Contracts Act 1995 (Vic). Before applying to VCAT about it, a party generally needs a certificate of conciliation from the chief dispute resolution officer of Domestic Building Dispute Resolution Victoria. A court claim arising mainly from the dispute generally needs that certificate or the court’s leave. The Building and Plumbing Commission says this dispute resolution service is now part of the Commission.
A letter of demand is still a sensible first step in a home building payment dispute.
Common questions
Have another question? Phone 1800 776 529 or send us a message.
For work covered by the Act, a “pay when paid” clause in a construction contract has no effect.
Usually, yes. You can still send a letter of demand and, if needed, sue on the contract. The general time limit for that is six years.
We send letters of demand at a fixed fee. If a payment claim may be the better route for your job, we will tell you before anything is sent and quote for that work first.
Law referred to
- Building and Construction Industry Security of Payment Act 2002 (Vic) ss 4, 7, 12, 13, 14, 14A, 14C, 14D, 15, 16, 17, 18, 54.
- Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025 (Vic).
- Domestic Building Contracts Act 1995 (Vic) ss 44, 56, 57, 57A.
- Limitation of Actions Act 1958 (Vic) s 5(1)(a).
Last reviewed: October 2026, by a Victorian solicitor with a current practising certificate. This page is general information about the law in Victoria as at October 2026. It is not legal advice about your circumstances.
Not paid for work on a job?
Send us your contract, invoices or payment claims, and messages. We can send a letter of demand on our letterhead for $440 including GST.
Phone: 1800 776 529
Email: info@lettersofdemand.com.au
Hours: Monday to Friday, 9 am to 5:30 pm
Office: 435 Nepean Highway, Frankston VIC 3199. We act across Victoria by phone, email and online.
Letters of Demand is a service of Professional Edge Lawyers.