Is it illegal not to pay a subcontractor?
No, it is a breach of contract rather than a crime, but the law gives you fast remedies that do not need a court.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Because it is not a crime, there is no authority to report it to. What you get instead is quicker than a court case. Start with the notified sum, the sum the notices fix. If your main contractor gave no valid notices, it is the sum you applied for. That comes from section 110B of the Housing Grants, Construction and Regeneration Act 1996. It is due on the final date for payment. Once that date passes unpaid, you can suspend work until you are paid, after giving the notice section 112 and your contract require. The time and reasonable costs of the suspension are recoverable. Interest runs on the late amount, under your contract or the law. And you can refer the dispute to adjudication at any time under section 108. The decision binds both sides until the dispute is finally decided, and the courts enforce it as a matter of routine. Keep that order. Every later step is stronger when the sum itself is not in dispute. Anything beyond the commercial position is for your solicitor.
Example
Illustrative example. The scenario and figures are invented.
The facts
A subcontractor has applied for £38,000, no notices have been received, and the final date for payment passed 10 days ago. The commercial position is that £38,000 is the notified sum and is overdue.
What happens
- A written demand goes out, recording the missed notices and the final date.
- Interest is worked out from the day after the final date.
- A suspension notice follows if payment does not.
- Adjudication follows if payment still does not arrive.
The outcome
The £38,000 is pursued as the notified sum, overdue since the final date, through those steps in that order.
Late Payment Claim demands what is overdue with the interest the law allows, and runs the remedies if it is still withheld.
Sources
- Housing Grants, Construction and Regeneration Act 1996, s 110B (Payment notices: payee’s notice in default of payer’s notice). legislation.gov.uk.
- Housing Grants, Construction and Regeneration Act 1996, s 112 (Right to suspend performance for non-payment). legislation.gov.uk.
- Housing Grants, Construction and Regeneration Act 1996, s 108 (Right to refer disputes to adjudication). legislation.gov.uk.