Part II of the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 (in force in England from 1 October 2011), sets out minimum payment rules for construction contracts. If a contract does not comply, the Scheme for Construction Contracts fills the gaps.
The payment cycle
| Step | What the Act requires |
|---|---|
| Due date | The contract must provide an adequate mechanism for working out what is due and when. Payment becomes due on the due date. |
| Payment notice | Given by the payer (or a specified person) within 5 days of the due date, stating the sum considered due and the basis of the calculation. If none is given, the payee's application or notice can become the notified sum. |
| Pay less notice | If the payer intends to pay less than the notified sum, it must give a pay less notice stating the amount it considers due and why, no later than the prescribed period before the final date for payment. |
| Final date for payment | The date by which the notified sum must be paid. The contract sets the period between due date and final date. |
If payment is not made
- The payee may suspend performance of all or part of its obligations after giving at least 7 days' notice, and is entitled to a reasonable extension of time and the costs of suspension and remobilisation.
- Either party can refer a dispute to adjudication at any time, with a decision normally within 28 days of referral.
- Pay-when-paid clauses are not effective, except where a third party payer is insolvent.
The residential occupier exclusion
A contract with someone for work on a dwelling they live in, or intend to live in, is not a construction contract under the Act. The statutory payment and adjudication rules do not apply unless the contract includes them. Contracts with developers, landlords and businesses are covered.
Our applications for payment and subcontract payment notices follow these rules, with due dates, final dates and pay less deadlines set out on every valuation.