I'm being told they can't pay me until they've been paid
The money is stuck somewhere up the chain, and our account is being treated as someone else's problem.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
If the clause ties your Due Date to an upstream certificate rather than to their being paid, see when payment depends on something further up the chain.
What's happening?
Your main contractor says it cannot pay you until its own client pays it. That can mean several things: a clause in your subcontract, a wait for a certificate further up, a dispute over a notice, or plain cash-flow trouble. Each has a different answer.
A clause that makes your payment depend on your main contractor being paid is a pay-when-paid clause. Section 113 of the Housing Grants, Construction and Regeneration Act 1996 deals with these. Whether it catches yours turns on the exact wording, the dates, the notices and any insolvency further up, and that is a question for your solicitor.
While the explanation goes unchallenged, the balance grows and you fund the job. Accept a cash-flow excuse as if it were a contract term and you can lose weeks of money you are owed.
The solution
Ask your main contractor, in writing, for the exact contract reason it is not paying. Then set the clause, the due date, the final date for payment, the notices and the upstream event side by side, each linked to its source. A cash-flow explanation is not a notice.
Late Payment Claim reads the clause, fixes the dates your subcontract actually gives, and demands the sum with interest running. Whether the clause works under section 113 goes to your solicitor, with the dates set out. Late Payment Prevention flags clauses like this before you sign your next subcontract.
Example
Illustrative example. The scenario and figures are invented.
The facts
A mechanical subcontractor is owed £27,400 on a certified application and is told the main contractor is waiting for the employer's payment. The subcontract says payment is due 7 days after the main contractor receives the employer's payment. It has no insolvency wording.
What happens
- The subcontract is read and the clause found. It has no insolvency wording, and that is noted.
- The payment record shows the application, a certificate for the full amount, and the final date for payment under the subcontract's own dates. That date has passed.
- The letter sets out the sum due, the final date and that the subcontract's own payment dates apply. It asks for payment within 7 days and notes the interest running.
- The main contractor pays £27,400 12 days later, before the employer's certificate is paid.
- The clause is flagged on the contract summary for the next negotiation.
- The solicitor is asked separately whether the clause works, a question the payment did not need answered.
The outcome
The £27,400 arrives before the employer pays, on the subcontract's own dates. The clause goes into the next negotiation, with the solicitor's answer to follow.