Law change pushes prompt payment of construction suppliers

15 August 2011

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15 August 2011 | Adam Leach

A UK law is changing to encourage companies to settle bills with construction contractors promptly.

The change is happening to the Housing Grants, Construction andRegeneration Act 1996 from 1 October. It means that once money is due, the payer has five days to issue a payment notice with the final amount owed. If they do not, the supplier can issue default notice for the amount it believes it’s owed. If the payer believes the default notice claims too much money, it has seven days to issue a ‘pay less notice’. If it doesn’t issue this notice within a week, it will be forced to pay whatever amount the supplier claimed in its default notice.

Until now, there has been no penalty for those who drag their feet over payment.

Rebecca Evans, a solicitor at Thomas Eggar, said: “You must ensure that all contract managers are aware of the potential consequences of a failure to issue timely payment notices and pay less notices, to ensure that default payment notices from contractors, if received, are carefully considered and pay less notices are issued on time where appropriate.”

When it is passed into law, the legislation will also change the way contractors and sub contractors handle payment. From 1 October, payments to sub-contractors can no longer be made contingent on receiving payment from the main contractor.

The changes apply to any construction contract entered into on or after 1 October.

 

See the law update in the September issue of Supply Management for more information

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