Part II of the Housing Grants (Construction and Regeneration Act) 1996 sets out provisions to ensure that payments are made promptly throughout the supply chain and that disputes are resolved swiftly. The 1996 Act was amended by Part 8 of the Local Democracy, Economic Development and Construction Act 2009 to close loop holes within its provisions. The government undertook to review the effectiveness of the 2009 Act 5 years after it came into effect in October 2011. The results of the review are expected soon.

LPA 66 describes the provisions of the above acts, and how their requirements are intended to be implemented in practice. The key points covered are;
• the definition of construction contracts which are covered by the Act;
• the core provisions of the Acts, including the right to interim payments, the right to be informed about the amount due, disallowing pay when paid clauses, the right to suspend performance for non-payment;
• payment notices, the client must issue a payment notice within five days of the date for payment, even if no amount is due, or the supplier’s application for payment can be treated as if it is the payment notice;
• pay less notices, the payer must pay the notified sum unless he issues a pay less notice in the manner required by the Act; and
• implied mechanisms, if the contract fails to provide an adequate mechanism for determining the due date and the final date for payment then the Act will imply one.

It is anticipated that the government review will highlight the following issues;
• inflated interim applications, where the payee issues a payment notice there is a temptation to use an inflated value as there is no requirement for the notified sum to be a proper value; and
• the form and content of a valid payment notice, there has been much litigation over what constitutes a valid payment notice.

LPA 66 – Overview and Review of the Construction Act Payment Provisions can be downloaded here.

LPA prepared by Zita Mansi, Associate, BLM
Article prepared by David Hutchinson, AGS Honorary Member

This article was featured in the July/August 2018 issue of the AGS Magazine which can be viewed here.