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Construction Act Changes

Posted on November 21, 2011 by B. Green There have been 0 comments

No notice of intention to pay less
- pay the notified sum

(An Alway Associates Advisory)

Scott Milner writes:-

Following on from my previous two articles concerning the amendments to the Housing Grants Construction and Regeneration Act 1996 Part 2 (HGCRA) by the Local Democracy, Economic Development and Construction Act 2009 (“LDEDC Act”), this article briefly looks at the new requirements with regards to withholding payment.

Right to Withold Withdrawn

Section 111 of the HGCRA provided the right to withhold payment after the final date for payment of a sum due, subject to giving an effective notice of intention to withhold within a "prescribed period‟.

Now "Pay Less" instead

The LDEDC Act has deleted this provision (in relation to any construction contract entered into after 1 October 2011) and substituted it with a new provision which now clearly requires the payer to pay the "notified sum‟.

What!

But the LDEDC Act goes on to provide that the payer may serve on the payee a "notice of intention to pay less‟  than the notified sum.

So the result is that a payment notice now has some legal clout.

Simply; you must now pay the notified sum, but you can avoid this if you serve a further notice within the prescribed period before the final date for payment. But that is not all...

What You MUST State

The new notice of intention to pay less must specify:-

(a) the sum the payer considers to be due on the date the notice is given; and

(b) the basis on which the sum is calculated.

Is this right?
Well that is what the Act says.

Reassess the Position

It is clear that the new requirement calls for a reassessment of the amount due at the time of the notice and perhaps inclusive of any set-off for costs or loss due to a breach of contract by the payee.

No longer are you setting off/withholding from an amount previously notified as due.

That exercise should be a straight forward one for a competent quantity surveyor - whether he/she likes it or not.

Timely Notice

However, serving the notice within the prescribed time is another issue (and from experience is where most set-off claims initially fail).

Faced with a payee‟s notice in default of a payer‟s notice (i.e. new s.110B – see my previous newsletter article) which puts the payer on notice of the notified sum, it is now even more fundamental that the notice of intention to pay less is issued on time and contains the correct level of detail.

For further advice ...

...on the amendments to the Construction Act, please contact Scott Milner at Alway Associates 01142 180668, or email scott.milner@alway-associates.co.uk


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