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What payment terms does the Construction Act give a subcontractor?

If the Construction Act covers your subcontract, it gives you a payment timetable, proper notices, the notified sum, and rights to suspend work and adjudicate.

Updated: . By Jack Butler-Kettle, Construction Claims Consultant.

The answer

Most UK subcontracts are construction contracts under the Housing Grants, Construction and Regeneration Act 1996. Here is what that gives you. The timetable: section 110 says your contract must set out what is due and when, with a due date and a final date for payment for each payment. The Payment Notice: your main contractor must send a notice stating the sum due and how it was worked out. It must arrive within the contract's period after the due date, under section 110A. If it does not, your application can stand as the notice under section 110B. The notified sum: if your main contractor wants to pay less, it must send a Pay Less Notice in time, stating the sum and the reason. Otherwise it must pay the notified sum in full, under section 111. No pay when paid: a clause making your payment depend on your main contractor being paid is ineffective, except in narrow insolvency cases, under section 113. Suspension: if the notified sum is not paid by the final date, you can suspend work under section 112 after giving the required notice. Interest is not in this Act: it comes from your subcontract or from the Late Payment of Commercial Debts (Interest) Act 1998. Adjudication: you can refer any dispute to adjudication at any time under section 108, usually with a decision within 28 days of referral. How each applies on your job depends on the actual wording and dates. Anything beyond the commercial position is for your solicitor.

Example

Illustrative example. The scenario and figures are invented.

The facts

Your subcontract has monthly applications, a due date 7 days after the application date and a final date 21 days after the due date. One month's application runs through the cycle with no notice from your main contractor.

What happens

  1. You apply for £52,000 on the application date.
  2. No Payment Notice arrives by the fifth day after the due date.
  3. No Pay Less Notice arrives before the final date.

The outcome

On those facts £52,000 is the notified sum and is payable on the final date. If it is not paid, the suspension, interest and adjudication routes open, each with its own notice rules.

Late Payment Prevention turns those rights into a diary and a chase routine you actually use.

Sources

  1. Housing Grants, Construction and Regeneration Act 1996, Part II (Construction contracts), as amended by the Local Democracy, Economic Development and Construction Act 2009, Part 8. legislation.gov.uk.
  2. Housing Grants, Construction and Regeneration Act 1996, s 110 (Dates for payment). legislation.gov.uk.
  3. Housing Grants, Construction and Regeneration Act 1996, s 110A (Payment notices: contractual requirements). legislation.gov.uk.
  4. Housing Grants, Construction and Regeneration Act 1996, s 110B (Payment notices: payee’s notice in default of payer’s notice). legislation.gov.uk.
  5. Housing Grants, Construction and Regeneration Act 1996, s 111 (Requirement to pay notified sum). legislation.gov.uk.
  6. Housing Grants, Construction and Regeneration Act 1996, s 113 (Prohibition of conditional payment provisions). legislation.gov.uk.
  7. Housing Grants, Construction and Regeneration Act 1996, s 112 (Right to suspend performance for non-payment). legislation.gov.uk.
  8. Late Payment of Commercial Debts (Interest) Act 1998. legislation.gov.uk.
  9. Housing Grants, Construction and Regeneration Act 1996, s 108 (Right to refer disputes to adjudication). legislation.gov.uk.