Payment is overdue and I'm thinking of stopping work
The money is overdue and stopping work looks like the only lever left, but it is a legal step with conditions.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
For the short answer on whether suspension is available, see can I suspend work for non-payment.
What's happening?
Section 112 of the Housing Grants, Construction and Regeneration Act 1996 gives you a right to stop work when you are not paid. It only applies in set conditions. They turn on the sum actually unpaid, the notices given, whether the Act covers your contract, and the written notice it requires before you stop.
Stopping also has practical and safety consequences for the site, the programme and your people. A template notice cannot tell you the right exists, that it was served properly, or that you will get the time and cost of stopping back. Stopping part of the work, remobilising and termination may each need thinking through too.
Get it wrong and a suspension on a defective notice can put you in breach. Then your main contractor counts the cost of your absence against you, and you still have not been paid.
The solution
Before you stop, confirm three things. The sum is a notified sum, the sum the notices fixed. Its final date for payment has passed. No valid Pay Less Notice cut it. Then list what stopping would affect: the gangs, the plant on hire, the programme dates and the cost of remobilising.
Late Payment Claim puts that record together and prepares the written notice of intention to suspend for you to serve. The notice gives at least 7 days and states the ground, and the suspension is costed for the account. Where the right itself is in doubt, it goes to your solicitor first.
Example
Illustrative example. The scenario and figures are invented.
The facts
A subcontractor is owed a notified sum of £33,000. Its final date for payment passed 9 days ago, and no notices were given. Two gangs are on site, the crane is on hire until the end of the month and a programme milestone is 3 weeks away.
What happens
- Before any decision, the payment record is put together. It shows the application, no notices, the final date, nothing in the bank and proof the demand was sent.
- The practical effects are listed beside it: the two gangs, the crane, the milestone and the cost of remobilising.
- That file goes to the solicitor with one question: is the right to suspend available on these facts, and what notice does it need?
- The advice is that it is, with 7 days' written notice stating the ground.
- The notice is served the same day, stating the ground as advised.
The outcome
The £33,000 arrives on the sixth day and work never stops. The cost of the 7 days of uncertainty is recorded for the account.