My payment depends on something happening further up the chain
Our payment waits on a certificate or a payment further up the chain, and nobody has checked whether that clause holds.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
If the money is overdue and the reason given is that they have not been paid, see what to do when told they cannot pay until they are paid.
If the balance is building while you wait, see why not to let a balance build while you keep working.
What's happening?
Some subcontracts hold back your payment until something happens further up the chain, such as a certificate to your main contractor. They may never use the words pay when paid, meaning payment only once your main contractor is paid. Section 113 of the Housing Grants, Construction and Regeneration Act 1996 prohibits that kind of clause, except in the circumstances it allows.
What your clause actually does depends on its exact wording, the facts and whether the Act covers your subcontract. It does not depend on what either side calls it. A long wait or an upstream certificate can hurt your cash flow while its legal effect is still an open question.
Meanwhile the money sits unpaid. Treat the delay as proof that the clause works, or that it does not, and you can lose weeks or pick the wrong fight.
The solution
Map exactly what the clause makes payment depend on: what you must apply with, what triggers the due date, the final date for payment and any upstream condition. Put each in its own row, linked to the clause, then compare the map with this month's events.
Late Payment Prevention reads your subcontracts for these conditions before they bite, and marks the open legal questions for your solicitor. Where money is already held back because of one, Late Payment Claim demands the sum the subcontract's own dates support.
Example
Illustrative example. The scenario and figures are invented.
The facts
A roofing subcontractor applies for £46,000. The main contractor's Payment Notice states the full sum but says nothing is due yet. The subcontract makes the due date the day the employer's agent certifies the main contract valuation that includes the subcontract works. The last certificate left out the roof.
What happens
- The clause is not labelled either way. It is mapped in rows: what the application needs, what triggers the due date, the final date for payment and the upstream condition.
- The row for this month records the application date, the certificate date, what the certificate covered and the notice given.
- On the map, £31,000 sits within the certified valuation and its final date has passed. The £15,000 roof element depends on a condition that, on the main contractor's reading, has not happened.
- Two legal questions go to the solicitor with the map. Does the condition work under the Act? Can leaving work out of a certificate push back a due date?
- The main contractor pays £31,000 within the week.
The application on the map
| Item | Amount |
|---|---|
| Application | £46,000 |
| Within the certified valuation, final date passed | £31,000 |
| Roof element, awaiting the upstream certificate | £15,000 |
The outcome
The £15,000 is certified upstream the next month and paid on the map's date. The clause is flagged on the contract summary for the next tender.