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Most companies never think of themselves as being in the construction industry. Then they renovate an office, fit out a shop or upgrade the air-conditioning in a warehouse, and a document headed “Payment Claim” arrives from the contractor. That document starts a statutory clock under the Building and Construction Industry Security of Payment Act 2004 (the SOP Act), and the company’s choices in the next two to three weeks can decide whether it ends up paying sums it disputes.
Many guides to the SOP Act are written for contractors who want to be paid. This one is written for the other side: the company that engaged the contractor. It explains when the Act applies to a company’s premises works, how to prepare a payment response, what happens at adjudication, and what to do if an adjudicator orders payment.
Short answer
If your company engaged a contractor in writing for works on non-residential premises, the contractor can serve a payment claim under the SOP Act. The company should serve a payment response stating its reasons for paying less, generally within 21 days or any earlier contractual deadline. Objections left out of that response usually cannot be raised later at adjudication.
Does the SOP Act apply to your company’s project?
Under section 4, the Act applies to contracts made in writing on or after 1 April 2005. “In writing” is interpreted broadly: an exchange of emails or a quotation accepted by message can be enough, and a contract need not be signed. The main exclusion relevant to companies is in section 4(2)(a): works on residential property that do not require approval from the Commissioner of Building Control. Works on offices, shops, restaurants, clinics and industrial premises are therefore generally within the Act.
“Construction work” in section 3 is wide. It includes alteration, repair and maintenance of buildings, installation of fittings such as lighting, air-conditioning, ventilation, power supply, fire protection, and security or communications systems, and the painting or decorating of internal surfaces. The Act also covers contracts to supply related goods and certain services, such as planning and site supervision.
| Typical company project | Likely covered? |
|---|---|
| Office or shop fit-out by a contractor under a written quotation | Yes, as a construction contract |
| Air-conditioning, electrical or security system installation | Yes, installation of fittings is construction work |
| Supply of built-in furniture or materials for the fit-out | Possibly, as a supply contract |
| Planning or site supervision services for the works | Possibly, as services under the Act |
| Residential works that do not need building approval | No (s 4(2)(a)) |
| Works carried out outside Singapore | No (s 4(2)(b)) |
What a payment claim is
Section 10 allows the contractor to serve one payment claim for each progress payment. The claim must state the amount claimed by reference to the period it covers, and it must be served by the date set by the contract (or the prescribed date if the contract is silent) and within 30 months of the last work, supply or completion certificate. A payment claim can look like an ordinary invoice or progress claim. If a document from a contractor refers to the Act or to a progress payment, treat it as a payment claim until a lawyer advises otherwise.
The payment response: the deadline that matters most
For a construction contract, section 11(1) requires the respondent to provide a payment response by the date set in the contract or within 21 days after the payment claim is served, whichever is earlier. If the contract says nothing, the deadline is 14 days. Under section 11(3), the response must:
- identify the payment claim it answers;
- state the response amount, meaning what the company accepts it should pay;
- where that is less than the claimed amount, give the reasons for the difference and for any amount withheld.
For a supply contract, section 11(2) allows the company to pay or to raise objections in writing by the due date. In both cases, a payment response may be varied only within the time allowed, including the seven-day dispute settlement period under section 12.
Why the reasons have to be complete
Section 15(3) prevents a respondent from raising, in its adjudication response, any objection that was not included in its payment response, unless the circumstances arose later or could not reasonably have been known. In W Y Steel Construction Pte Ltd v Osko Pte Ltd [2013] SGCA 32, the Court of Appeal confirmed that this rule applies even where no payment response was served at all, and described the scheme as “pay now, argue later”. A company that stays silent, or gives a vague response, may find that its complaints about defects, delay or incomplete work cannot be considered by the adjudicator.
A good payment response deals with each disputed item: works not done, defective works with photographs and reports, variations not instructed, and any back-charges or liquidated damages the company says it is entitled to deduct, each with a figure.
Adjudication: the timeline from the company’s side
| Stage | Time limit | Section |
|---|---|---|
| Payment response (construction contract) | Contract date or 21 days after service, whichever is earlier; 14 days if the contract is silent | s 11(1) |
| Dispute settlement period | 7 days after the response deadline | s 12(6) |
| Contractor’s notice of intention and adjudication application | Application within 7 days after entitlement arises | s 13(2), (3) |
| Company’s adjudication response | Within 7 days after receiving the application | s 15(1) |
| Payment of adjudicated amount | Later of 7 days after service of the determination or the date fixed by the adjudicator | s 22(1) |
Applications are lodged with an authorised nominating body, currently the Singapore Mediation Centre, which serves a copy on the company. Seven days is very little time to prepare a response with evidence, so the work should begin as soon as the payment response is sent. Our contractor’s guide to SOP adjudication describes the process from the other side, which is useful for anticipating the claim.
If the adjudicator orders the company to pay
An adjudication determination is binding under section 21 until the dispute is finally decided by a court or tribunal or settled. If the company does not pay on time, section 23 allows the contractor to exercise a lien over unfixed goods it supplied, to suspend work after giving notice (section 26 requires seven days to elapse after notice), and to apply for permission to enforce the determination as a judgment under section 27(1).
A company that wants to set aside the determination must pay the unpaid adjudicated amount into court as security under section 27(5). The grounds in section 27(6) include improper service of the payment claim, breaches of the Act’s procedure, breach of natural justice and fraud. Under section 27(7), a respondent generally cannot rely on a ground unless the objection was included in its adjudication response. In W Y Steel, the Court of Appeal accepted that enforcement may be stayed where there is clear evidence that the contractor is insolvent, but said financial difficulty short of that will usually not be enough.
Paying an adjudicated amount does not end the company’s rights. The determination has temporary finality, so the company can still pursue its defects or overpayment claim in court or arbitration later. Our guide on how to sue a company in Singapore covers the court options.
Tenant fit-outs and landlords
Where the premises are leased, the fit-out often has to meet the landlord’s requirements, and the same works may later be the subject of a reinstatement obligation at the end of the lease. Keep the contractor’s scope and as-built records, because they matter later in any reinstatement and security deposit dispute.
What the company should do
- Board minutes: before signing a fit-out contract, record who may approve variations and sign payment responses. When a payment claim arrives, minute the decision on the response amount and, if needed, the appointment of solicitors to handle adjudication.
- Registers: keep the register of directors and secretaries current so that it is clear who has authority to act. Maintain an internal register of contracts and claims recording when each payment claim was received and when the response is due.
- ACRA filings: keep the company’s registered office address and officer details up to date with ACRA. Contractors often serve documents at the registered office, and a claim that sits unopened at an outdated address can cost the company its right to respond.
- Accounts: record accepted amounts as liabilities, disclose disputed amounts and adjudicated sums appropriately, and track retention sums and defects liability periods so that capital expenditure is recorded correctly.
The Building and Construction Authority’s overview of the Security of Payment Act and the full text of the SOP Act are helpful references.
Frequently asked questions
Our contractor sent an invoice, not a “payment claim”. Does the Act still apply?
Possibly. The label is not decisive; what matters is whether the document meets the requirements of section 10 and the prescribed form. Check it carefully and take advice early rather than assume it is an ordinary invoice.
What happens if we miss the payment response deadline?
The contractor may proceed to adjudication, and the company will generally be unable to raise objections it did not put in writing. The company may still provide a response during the seven-day dispute settlement period under section 12(5).
Can we refuse to pay because the works are defective?
Yes, but the defects and the amount withheld must be stated in the payment response with reasons. A general complaint without figures or evidence carries little weight at adjudication.
Does the Act apply to renovation of a director’s home paid for by the company?
Works on residential property that do not need approval from the Commissioner of Building Control are excluded by section 4(2)(a). Larger residential works requiring approval may fall within the Act.
If we pay the adjudicated amount, have we lost the dispute?
No. An adjudication determination is binding only until the dispute is finally decided or settled. The company can pursue its claims in court or arbitration afterwards.
Need a lawyer?
This article is general information about Singapore law for companies, directors and shareholders. It is not legal advice, and it does not take account of your circumstances. Raffles Corporate Services Pte Ltd is a corporate service provider, not a law practice, and does not give legal advice.
If your company has received a payment claim or an adjudication application from a contractor, we can introduce you to an experienced Singapore law firm that handles Security of Payment Act adjudications and construction disputes. Tell us briefly what has happened and we will connect you.
Email: [email protected]
WhatsApp: +65 8501 7133 or +65 9018 0072
We can also take care of the corporate side for you: board and shareholder resolutions, register updates and ACRA filings.
Conclusion
For a company renovating or fitting out its premises, the SOP Act turns a contractor’s progress claim into a short statutory timetable. Diarise the payment response deadline, set out every objection with figures and evidence, prepare early for a seven-day adjudication response, and remember that paying an adjudicated sum does not end the company’s right to argue the merits later. For help with the resolutions, registers and filings around a dispute, contact Raffles Corporate Services.
The Editorial Team, Raffles Corporate Services