Construction Act: importance of payment notices
Construction Act: importance of payment notices06 March 2019 Written by James & George Collie

constructionAmendments to The Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”) came into force in respect of building contracts set up on or after 1st November 2011.  The pre-existing “withholding notice” was replaced by what is now known as the “pay less notice”.    What is to happen is that the payer (usually the client – or potentially the architect if so authorised) can serve on the contractor a notice of his or her intention to pay less than the “notified sum”.   A notified sum is an amount due in terms of the construction contract set out in an earlier payment notice issued by the payee.

To be effective a pay less notice must set out in detail the amount the client considers to be due and also why that sum has been fixed upon.  That has to happen with a supporting calculation even where it is proposed that nothing is to be paid.    The importance of these notices cannot be overstated.   If the Act is not followed in terms of its detailed procedure then the client will find he has to pay the sum the contractor has intimated in the earlier payment notice – even if the amount has no legitimacy whatsoever - or indeed has been overtaken by some serious breach of contract that would otherwise allow the client to argue no sums ought to be paid to the contractor.

The pay less notice has to contain the requisite information but it must also be served within whatever time limits are prescribed in the contract.   If the building contract is silent on the period of notice, the Act imposes a time limit within its scheme.

The importance of this amended legislation is clear – if you overlook the payment notice and do not serve a pay less notice timeously, the building contractor will, in 99% of cases, get paid everything they ask for regardless of whether or not any sums were properly due at that time.

Please contact Duncan Love by email (This email address is being protected from spambots. You need JavaScript enabled to view it.) if you require any further information or advice in relation to construction law disputes and in particular payment notices.

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