Unlocking Payment Disputes – Payment Notices and Adjudication

The construction sector has been notorious for late payment and non-payment for many years. So much so, that the government has intervened to regulate payment in this sector to a degree that it has not done in any other sector.

Whether you get paid is no longer a question of who can afford to chase the debt but whether you organise your invoicing / payment application procedure in accordance with your contract. So it is down to you.

If your contract does not state clearly when you are to be paid, then the legislation steps in. So there are no real excuses.

Why does it matter? It matters because if you follow the contract procedure you will always know what you are going to be paid, when and the basis for the calculation of what you are to be paid. If you don’t agree with what you are to be paid then you can dispute that in adjudication.

If the payer just doesn’t tell you what the payer is going to pay or tries to go back on what it stated it would pay without giving you proper notice you will be entitled to the amount you applied for.

The trick is to know the payment regime on your contract and to FOLLOW IT.

The best way of people avoiding paying you is if they can say that your application for payment is not valid or to claim that they have served a valid payment notice or a valid notice to pay less. So the content of your application for payment and the timing and content of the payer’s notices is key.

Just as there is a timetable for your application for payment there is timetable for the payer’s payment notice to be given or the payer to issue the notice to pay less.

So you need for each contract to set out the following key dates;

  • The date by which you must make an application for payment
  • The date by which the payer must issue a payment notice
  • The date by which the payer must issue the notice to pay less
  • The final date for payment

Your payment application must state the amount you consider due to be paid for the application and the basis upon which that has been calculated. You must send it before the last day for applying for payment. You must send it to the right place or email address.

If your contract does not permit or require you to make an application for payment then you need to issue a default payment notice as soon as it becomes clear that the payer has not issued a payment notice. The default notice must state the amount you consider to be due for the valuation and the basis of the calculation.

If you do not receive a payer’s notice or a notice to pay less in the required timescale then you are entitled to be paid the amount of your application. The payer cannot argue over the valuation or try to deduct any money.

If you do receive a payer’s notice and it is late, it is not valid. If you receive a notice and it does not show the amount due to be paid and the basis of the calculation, it is not valid.

If you follow the procedure and check to see if the payer has, and he hasn’t, then you are in a strong position to secure payment. That is because the payer, unless poorly advised, will realise that if he has not followed the procedure the payer is obliged to pay. Also the payer will know that if he refuses to pay you can refer the matter to an adjudicator who can direct the payer to make payment.  The adjudication may take only a few weeks and does not involve lots of paperwork and expense.

Just showing the payer that there is no defence to your claim is often enough to get a sensible agreement to pay you. If the payer is just not paying, then using adjudication is a cost effective way of collecting the debt.

There is a sting in the tail to the procedure. If you do not make your applications on time with the correct detail or issue a default notice (where your contract does not permit or require you to make an application), even though you have done lots of work of very significant value, you may have no entitlement to payment.

So it is down to you for each job (contract) to diarise the key dates and to follow the contract process and to check that the payer does too. If your contract is unclear or just based on an oral agreement then take some advice and if necessary follow the legislative fall back known as the Scheme for Construction Contracts.