You may have more protection than you think if you are party to a construction contract.
The Housing Grant, Construction and Regeneration Act of 1996 marked a very significant step forward in the construction industry. Even now, many in the industry are still not aware of its impact. In basic terms, it promotes fairness in the payment process, and provides the fast-track remedy of adjudication.
For the purposes of the Act, a ‘construction contract’ is very widely defined, and includes contracts with construction professionals such as architects and quantity surveyors. Importantly though, it does not cover domestic contracts with the home-owner.
Here are the key take-aways from the Act:
Determining Payment Sums and Dates
- Contracts must specify when payments are due and the final date for payment of any due sum.
Paying in Stages
- Payments can be made in instalments, stage payments or other periodic payments, as long as the duration of the work is expected to be longer than 45 days.
- Parties are free to agree the amount and intervals of payments
- If they do not, the payment terms will be default by law, to the following situation (i) you can seek payment 28 days after you start work and every 28 days thereafter by setting out how much you think you should be paid (ii) the date of your application is the ‘due date. The final date for payment is 17 days later.
Conditional Payments
- It is unlawful for the paying party to link payment to receiving payment itself. To explain, imagine there is a contractual chain involving a client, a main contractor, and a sub-contractor. The main contractor is not able to withhold payment to the sub-contractor just because it has not received payment for the work from the client.
Payment Notices
- Your construction contract must provide for a payment notice to be given not later than five days after the payment due date.
- A payment notice must specify the sum that the party who serves it considers is due at that due date and the basis on which that sum was calculated.
- Even in situations where the sum due at a given due date is zero, a payment notice must still be given.
- If a party to a contract fails to give a payment notice, the unpaid party may serve a default payment notice. A default payment notice must specify that the unpaid party considers is due or was due at the payment date and the basis on which that sum was calculated.
Pay Less Notices
- The paying party must pay a notified sum or serve a pay less notice if it wants to pay less than the notified sum. The notified sum is defined as the amount specified in the payment notice, or if there is no payment notice, the amount applied for.
- If the paying party wishes to pay less than the notified sum, it must serve a pay less notice.
- The parties can agree when the pay less notice has to be issued provided it is in advance of the final date for payment. If there is no agreement, the default position is that it must be given no later than 7 days before the final date for payment.
Suspension
- Failure to pay a sum due under a construction contract by the final date for payment entitles you to suspend your work, provided you give 7 days advanced notice in writing.
Adjudication
It is important to note that failure to comply with certain provisions, particularly relating to notices and pay less notices, can result in adjudication proceedings being brought.
The construction and projects industry is notorious for litigation, claims and disputes. If you are party to a construction contract and you think you are due money for work carried out, Alba Claims may be able to assist. Our relationships with our panel law firms enable suitable cases to be pursued on a no win no fee basis*.
If we can help, please get in touch today.
*Please note that there may still be fees payable to the adjudicator.
