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Construction Industry

Industry Sectors
Construction Managers

The Construction Act and Late Payments Act.

The construction industry has been fraught with payment issues for many decades which the financial crisis only exacerbated, pushing thousands of SME’s and large firms to the edge as real-estate values plummeted and demand for housing dropped considerably.

Fast forward to more recent times and the cost of materials, labour shortages and rising asset inflation has put more downward pressure on company’s ability to pay their Invoices on time. Large invoice sums with long complex project times have especially seen longer payment waiting times with company’s regularly waiting longer than 60 days to get paid.

It is commonplace for the construction companies to differ in price from the original quote amount to the final invoice demand causing more financial pressure on the supplier to bear the short-term costs of materials, labour etc whilst they wait for partial or full payment.

These cash flow issues are often the chief source of disputes which regularly lead to the demise of many business relationships and cause businesses to close their doors for good.

 

Construction Manager

 

The Construction Act, also known as The Housing Grants, Construction and Regeneration Act 1996 include provisions to ensure that payments are made promptly throughout the supply chain.

Due to the nature of the construction industry prices are constantly fluctuating, decisions and styles and quality controls are hard to maintain. Companies, especially further along the supply chain can often expect to be paid irregularly/ad-hoc and fall short of the expected amount.

  1. The right to be paid in interim, periodic or stage payments.

  2. The right to suspend (i.e. partly or temporarily) performance for non-payment and to claim costs and expenses incurred and extension of time resulting from the suspension.

  3. The client must issue a payment notice within five days of the date for payment, even if no amount is due. Alternatively, if the contract allows, the contractor may make an application for payment, which is treated as if it is the payment notice.

  4. The client must issue a “Pay Less Notice” if they intend to pay less than the amount set out in the payment notice, setting out the basis for its calculation.

  5. The notified sum is payable by the final date for payment.

  6. If the client (or specified person) fails to issue a payment notice, the contractor may issue a default payment notice. The final date for payment is extended by the period between when the client should have issued a payment notice and when the contractor issued the default payment notice. If the client does not issue a pay less notice, they must pay the amount in the default payment notice.

  7. Pay when certified clauses are not allowed, and the release of retention cannot be prevented by conditions within another contract.

If invoices do remain unpaid then construction companies have the right to claim compensation and Interest via the Commercial Debt regulations Act 2013. See More information.

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