What a payment schedule must contain under section 21 of the Construction Contracts Act 2002

1. In writing. An email is fine; a phone call is not. 2. Identify the payment claim it responds to — usually by claim number and date. 3. State a scheduled amount — the figure the payer proposes to pay (which can be nil). 4. Where the scheduled amount is less than the claimed amount, indicate the manner in which the payer calculated the scheduled amount, the payer's reasons for the difference, and — where the payer is withholding payment on any basis — the reasons for withholding.

Payment Schedules Under the Construction Contracts Act — How to Respond to a Payment Claim (NZ)

Steve Parker
Jun 1
8 min read

Updated: 5 days ago

A payment schedule is the payer's written reply to a payment claim under the Construction Contracts Act 2002. Section 21 requires it to identify the claim, state a scheduled amount, and — where that figure is lower — explain the calculation and the reasons. Miss the 20-working-day window and the full claimed amount becomes a debt the payer must pay.

By Steve Parker · Trueworks · NZ construction contract analysis · 7 min

What you'll learn in this post

What a payment schedule must contain under section 21 of the Construction Contracts Act 2002
The 20-working-day clock, and what happens when a payer misses it (section 22)
How to read and respond to a payment claim without losing the right to dispute it

Quick answer: A payment schedule is the payer's written response to a payment claim under the Construction Contracts Act 2002. Section 21 requires it to be in writing, identify the payment claim, and state a scheduled amount; if that amount is lower than the claimed amount, it must set out how the figure was calculated and the reasons for the difference or for withholding payment. The payer has the period stated in the contract — or 20 working days by default — to provide it. Provide no valid schedule and, under section 22, the payer becomes liable to pay the whole claimed amount on the due date, recoverable as a debt with no set-off available.

Most New Zealand contracting disputes that reach adjudication do not turn on the quality of the work. They turn on a procedural step that a payer got wrong weeks earlier: the payment schedule. The Construction Contracts Act 2002 (the CCA) sets up a deliberately strict payment regime, and the payment schedule is the payer's single opportunity to dispute a claimed amount before the figure hardens into an enforceable debt.

This post is written for the party receiving a payment claim — a head contractor served by a subcontractor, a principal served by a main contractor, or a homeowner served by a builder. If you are the one sending claims, the companion piece on how to write a compliant payment claim covers the other side of the same exchange.

What a payment claim sets in motion

Under section 20 of the CCA, a payee (the party doing the work) may serve a payment claim for a progress payment. Since the 2015 amendments removed the residential/commercial split, the regime now applies to residential building work too. When a payment claim is served on a residential occupier, it must be accompanied by the prescribed outline of the payment process — the document published by MBIE as Form 1 (there is a walkthrough of Form 1 and how it is used on this site) — or the claim is not valid. That is the first thing to check when a claim arrives: residential occupier, no Form 1, no valid claim.

Once a valid claim is served, the clock starts. The payer who wants to pay anything other than the full claimed amount must reply with a payment schedule.

What section 21 requires in a payment schedule

A payment schedule is not a letter saying "we dispute this". Section 21 sets out what it must contain, and the courts read those requirements strictly:

In writing. An email is fine; a phone call is not.
Identify the payment claim it responds to — usually by claim number and date.
State a scheduled amount — the figure the payer proposes to pay (which can be nil).
Where the scheduled amount is less than the claimed amount, indicate the manner in which the payer calculated the scheduled amount, the payer's reasons for the difference, and — where the payer is withholding payment on any basis — the reasons for withholding.

The reasoning requirement is where most payment schedules fail. A schedule that simply lists a lower number without explaining the calculation, or that gives reasons too vague for the payee to understand the case it has to meet, can be treated as no schedule at all. New Zealand case law has repeatedly held that a payment schedule must be clear enough that the payee can see exactly why each deduction has been made. Generic wording such as "incomplete works" without identifying which works, or "set-off for delay" without quantifying it, is the kind of drafting that gets a schedule struck down.

The 20-working-day clock

The payment schedule must be provided within the time the contract specifies. If the contract is silent — or there is no written contract — the default under the CCA is 20 working days after the payment claim is served. Working days exclude weekends and public holidays, and the standard close-down period between 24 December and 5 January does not count.

This deadline is unforgiving. There is no general discretion to extend it for a busy office or an absent director.

What happens if no valid schedule is provided — section 22

This is the part that catches payers out. Under section 22, if the payer does not provide a payment schedule within the required period, the payer becomes liable to pay the whole of the claimed amount on the due date for payment. The payee can then recover that amount as a debt due in court, together with reasonable recovery costs.

The sting is in what the payer cannot do. In recovery proceedings on an unscheduled claim, the payer is not entitled to raise a counterclaim, set-off, or defence relating to the merits — the quality of the work, an alleged overcharge, a back-charge — none of it can be argued at that stage. The court looks only at whether a valid claim was served and whether a valid schedule was provided in time. This is why payees often obtain summary judgment quickly on unscheduled claims, and why a missed schedule is one of the most expensive procedural errors in NZ construction.

What happens if you schedule but underpay

Providing a schedule is not the same as paying. If the payer issues a valid payment schedule stating a scheduled amount but then fails to pay that scheduled amount by the due date, the payee can recover the unpaid scheduled amount as a debt and may also serve notice of intention to suspend work. Suspension requires written notice and a five-working-day grace period before work stops; the payee who suspends correctly is protected and entitled to an extension of time and reasonable costs on resuming. The full sequence from the other side of the table — reminder, notice, suspension, adjudication — is set out in what a subcontractor can do when payment stops.

The payee can also refer the dispute to adjudication under the CCA — a fast, low-cost determination that runs in parallel with, or instead of, court recovery. A disputed deduction in a properly drafted schedule is decided on its merits at adjudication, which is exactly why the schedule's reasons need to be substantiated rather than asserted.

Responding to a payment claim — the working-day clock, step by step

When a payment claim arrives, the response is a fixed sequence with a hard deadline at the end of it. Work through the steps in order:

Check the claim is valid. Correct payee, identifies the construction contract and the work claimed, states a claimed amount and a due date, and — where it is served on a residential occupier — carries the prescribed Form 1 outline of the payment process. Treat a conclusion of invalidity with care: if you decide the claim is invalid, serve nothing, and turn out to be wrong, section 22 applies in full.
Diarise the response deadline the day the claim arrives. The schedule must be provided within the period the contract specifies; where the contract is silent, the Act's default is 20 working days after the claim is served. Working days exclude weekends, public holidays and the 24 December to 5 January close-down. Treat the date as fixed — there is no discretion to extend it.
Assess the claim and decide the scheduled amount. Measure the work actually in place against the contract documents and any agreed variations — not against the claimed figure. The scheduled amount can be nil, but it must be a stated figure.
Give reasons for any difference. For every dollar between the claimed amount and the scheduled amount, set out how the scheduled amount was calculated, the reasons for the difference, and — where payment is being withheld — the reasons for withholding. This is the substantiation section 21 demands, and it is the part an adjudicator reads first.
Serve the schedule correctly, before the deadline. In writing, to the right party, by a service method the contract allows, with proof of service kept. A schedule served one working day late is no schedule at all.

Miss the deadline and the consequence is automatic: under section 22 the whole claimed amount becomes payable as a debt on the due date — recoverable in court, with no counterclaim or set-off available in those proceedings.

Before you serve the schedule

The deadline is diarised and you are inside it — the contract period, or 20 working days from service where the contract is silent.
The schedule identifies the payment claim it responds to, by claim number and date.
A scheduled amount is stated — an actual figure, even if that figure is nil.
Every deduction carries a calculation and a reason specific enough for the payee to see the case it has to meet.
Service is provable — written, to the correct party, by a method the contract allows, with a record kept.

A variation in dispute is a common reason for a difference between the claimed and scheduled amounts. If the deduction rests on a contested variation, the underlying valuation needs to stand on its own — see a subcontractor's options when a variation is done but unpaid and the remedy of suspending work for non-payment for how the same facts look from the payee's side.

Where an independent review helps

A payment schedule is a 20-working-day deadline attached to a debt-creating consequence, and the difference between a defensible schedule and a struck-down one is usually the quality of the substantiation, not the size of the deduction. An independent, code-cited read of the disputed line items — measured against the contract documents, NZS 3910:2023 valuation rules, and the Building Code — gives the payer a schedule that holds up if the matter goes to adjudication. That is the analysis Trueworks provides: a defensible second opinion, in writing, with citations, turned around same-day.

About Trueworks

Trueworks is built by Steve Parker — 20 years on the analytical side of NZ construction. Variation reviews, contract analysis, quote-checks and pre-trade-start documentation, citation-backed against NZS 3910:2023, the Construction Contracts Act 2002, and the NZ Building Code. Decision-support, not decision-maker: every output is reviewed and signed off by the client before anything is served, certified or filed.

This post is general information about the NZ payment regime, not legal advice on a specific dispute. For a determination on your own contract, take advice on your facts.

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