First: is it a construction contract?
The Construction Contracts Act 2002 applies to contracts for carrying out construction work in New Zealand, which is defined broadly: building, alteration, repair, demolition, civil works, and much of the related work such as site preparation, scaffolding, and installing fixtures and services. It covers head contracts and subcontracts, written or oral. It also covers related design, engineering and quantity surveying work in many cases. If you are unsure, assume it may apply and keep reading.
Some parts of the Act work differently where the client is a residential occupier, meaning a homeowner having work done on the home they live in. The payment claim process applies to them too.
Step 1: Send a proper payment claim
An invoice is not automatically a payment claim. To be one, it must, among other things:
- be in writing and identify the construction contract
- identify the construction work and the period it relates to
- state the amount claimed and the date it is due
- show how you calculated the amount
- state that it is made under the Construction Contracts Act 2002
Every payment claim must also be accompanied by an outline of the payment claim process in the prescribed form. Keep a record of when and how the claim was served.
Step 2: Watch the payment schedule deadline
If the payer disputes the claim, they must give you a payment schedule saying how much they will pay and why it is less than claimed. They must do so within the time the contract sets or, if the contract does not set one, within 20 working days after the claim was served.
- No schedule, no payment: the payer becomes liable to pay the full claimed amount on the due date.
- Schedule, but the scheduled amount is not paid: the payer is liable for the scheduled amount.
In either case you can recover the unpaid amount as a debt due in court, and the Act restricts the payer from raising counterclaims and set-offs in that proceeding. This is the strongest position a construction creditor can be in, and it comes from getting Step 1 right.
Step 3: Consider suspending work
Where a claimed or scheduled amount is not paid by its due date, the Act allows the payee, after giving at least 5 working days' written notice of the intention to suspend, to stop work. Follow the notice requirements exactly. Suspending without the right notice can put you in breach of the contract.
Step 4: Do not accept "pay when paid"
Clauses that make your payment conditional on someone further up the chain being paid have no effect under the Act. A head contractor that has not been paid by the principal still owes you under your subcontract.
Step 5: Adjudication, or court
Where there is a genuine dispute, whether about the claim, variations, defects or delay, either party can refer it to adjudication under the Act. Adjudication is faster than court. Where there is no genuine dispute and no schedule was given, recovery as a debt in the District Court, or a statutory demand against a debtor company, is usually more direct.
Step 6: Retention money
If money has been held back as a retention under a commercial construction contract, it is held on trust for you. Since amendments in force from October 2023, retention money must be kept separate and properly accounted for, there are offences for failing to do so, and directors can face personal consequences. If the party holding your retentions fails, ask the receiver or liquidator whether they were held on trust.
Step 7: If the company has gone
A liquidated head contractor can still leave someone liable. Check the credit application or contract for a personal guarantee from a director, and check your retentions. Then claim in the liquidation for the rest.
When the client is the one not paying a builder
Everything above applies in the other direction too. If you are a builder or contractor whose client will not pay, the same payment claim process is your starting point.
How we can help
We review the contract, the claim and the timeline, tell you where you stand, and pursue the amount, through a demand, a statutory demand or court, and enforcement where needed. See construction and subcontractor debt recovery.
General information, not legal advice. This page describes New Zealand law and practice as at October 2026; the right step for a particular debt depends on its facts. Where a matter needs legal advice, we will say so.