The Construction Act is Changing and if you are not prepared you may find yourself seriously out of pocket.  If you do not issue the correct notices under the Act, as a Client you could be forced to pay for works which have not been properly carried out, and you will be unable to correct the position until the next pay date.

You may think that because you don’t operate with written contracts, adjudication does not apply to you, but beware because the changes to the Construction Act means that Adjudication will be available on a wider range of construction contracts. Previously statutory adjudication was only available where the construction contract's terms were ALL in writing. The new Act now allows statutory adjudication in any construction contract, provided that the adjudication provision is in writing. The number of adjudications are likely to increase. This could pose serious traps if you and your employees are not up to date.

You will be aware that previously, there were no consequences to a failure to give a payment notice. Under the new Act if the paying party fails to give a timely payment notice, the receiving party can issue a default payment notice setting out what they consider to be due. This is a significant change and shifts the balance of power of the parties 180 degrees. In short, if you don't tell your contractor what you are going to pay him, you have to pay him the amount he told you was due, irrespective of how accurate his bill is.  For a contractor this is a wonderful opportunity to ensure fair payment, but the consequences for a client who fails to give a notice is obvious.

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.   

It is plain to see the benefit the new act may have on cashflow, particularly for smaller construction companies. However, there are pitfalls for the unwary and those who don't want to get caught out must get prepared. 

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