When is a Pay Less Notice needed?
Whenever your main contractor plans to pay you less than the notified sum; how late it can send one is a separate question.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
For how late the notice can be served, see how late a Pay Less Notice can be served.
If the Payment Notice you received is already lower than your application, see the difference between a Payment Notice and a Pay Less Notice.
The answer
Under section 111 of the Housing Grants, Construction and Regeneration Act 1996, your main contractor must pay the notified sum by the final date for payment. The exception is a valid Pay Less Notice, sent in time. So start with two figures: the notified sum, and what your main contractor plans to pay. If it plans to pay the notified sum in full, no Pay Less Notice is needed. If it plans to pay less, it needs one, whether the reason is a valuation disagreement, a set-off or a contra-charge. Each deduction still needs its own basis under your subcontract and evidence behind it. Paying less without checking the notice route leaves your main contractor exposed. It does not always need to have sent a Payment Notice first. How late the notice can arrive is answered by the deadline in your subcontract.
Example
Illustrative example. The scenario and figures are invented.
The facts
Your main contractor's Payment Notice states £60,000. Before the Pay Less Notice deadline, it finds a £5,000 item it wants to deduct, and now plans to pay you £55,000.
What happens
- You check whether a Pay Less Notice for £55,000 arrives before the deadline.
- Your file records the Payment Notice, the evidence for the £5,000 item, the £55,000 figure and the route your subcontract requires.
- You check each later cycle on its own facts, rather than applying one answer to every cycle.
The notices in figures
| Item | Amount |
|---|---|
| Payment Notice | £60,000 |
| Item to be deducted | £5,000 |
| Planned payment | £55,000 |
The outcome
The file shows the £60,000 notice, the evidence for the £5,000 deduction, the planned £55,000 and the route. So you can see whether the lower payment was properly noticed.
To have a short payment tested against the notices that should have come with it, see our Underpayment Claim service.