A Pay Less Notice has landed and gutted my payment
The number in the notice is a fraction of what we applied for, and the reasons look thin.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
For what to check on the notice and each deduction, see what to check when a Pay Less Notice is received.
What's happening?
Your main contractor has sent a Pay Less Notice: the notice it must send if it plans to pay you less than the sum already notified. Under section 111 of the Housing Grants, Construction and Regeneration Act 1996, it has to arrive in time. It also has to state the sum your main contractor thinks is due and how that sum was worked out.
That gives you two separate questions. Was the notice given properly: by the right person, in time, with a sum and a basis, and sent the way the contract requires? And are the deductions right? A notice can fail on one question and pass the other. The heading on the document decides neither.
If you argue only the figures, a notice that may not have worked gets paid as if it had. If you do nothing before the final date for payment, the lower figure is paid and the difference waits. Adjudication is not your only next step: a question, a written response or a fuller claim may come first.
The solution
Keep the notice, its attachments and the record of when and how it arrived. Then test it twice. First as a notice: who sent it, when it arrived, the sum it states, the basis it gives and how it was served. Then on the figures, deduction by deduction, against your measure and your records.
Underpayment Claim runs both tests. If the final date for payment is days away, the notice check comes first, the same day. We answer the notice in writing where it fails, and carry each unsupported deduction into your next application, or into an adjudication where the sum justifies one. Underpayment Prevention puts the same check into your team's routine, so the next notice is tested the day it lands.
Example
Illustrative example. The scenario and figures are invented.
The facts
A subcontractor applies for £112,000. Its main contractor's Pay Less Notice states £61,000 and gives defective work and contra-charges as the reasons. The notice is checked before anything else is done.
What happens
- The check shows the right person sent it, but it arrived 4 days before the final date for payment when the contract requires 5. It gives no figure against either reason.
- The subcontractor's response sets out both faults, the late notice and the missing basis, and asks for the £112,000 as the notified sum.
- The main contractor pays £61,000 and offers a meeting.
- At the meeting the £51,000 difference is broken down for the first time. £28,000 is for two measured items said to be incomplete, and £23,000 is a scaffold hire contra-charge.
- Dated photographs show the measured items were complete, and they are agreed in the next cycle.
- The scaffold charge has no notice, no hire invoice and no record of the hire period, and it is withdrawn.
The cycle in figures
| Item | Amount |
|---|---|
| Application | £112,000 |
| Pay Less Notice | £61,000 |
| Paid | £61,000 |
| Difference | £51,000 |
| Measured work said to be incomplete, agreed next cycle | £28,000 |
| Scaffold hire contra-charge, withdrawn | £23,000 |
The outcome
The notice dispute never goes to adjudication, because the money comes back through the account: £28,000 in the next cycle, and the £23,000 charge withdrawn.