Payment For Construction Works

The primary benefit that a contractor / sub-contractor receives for carrying out construction works is payment. The profit margin on construction works is conventionally low. During a period of financial uncertainty or downturn, problems with payment can have a far-reaching impact on the supply chain. Therefore, payment provisions sit at the heart of construction contracts and construction law as a whole. The Housing Grants, Construction & Regeneration Act 1996 (the Act) is the key piece of law on this topic.

The Act sets out a mechanism for regular payment for works throughout the life of the project, which all construction contracts (as defined) must comply, and to the extent that they don’t, the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the Scheme) fills the contractual gaps / corrects the contract. Standard form contracts (e.g. JCT) comply with the Act.

The regular (e.g. monthly) statutory payment mechanism essentially involves a payment application by the payee, a Payment Notice by the payor (or in default by the payee) and a Pay Less Notice by the payor. This superficially simple process in practice contains a number of hidden complexities and has spawned a considerable amount of caselaw. In particular it has given rise to so-called smash and grab claims, where a payee alleges that a payor has failed to serve a valid Payment and/or Pay Less Notice, but the payee has in effect served a valid Payment Notice, and in those circumstances the payee says that it is entitled to be paid the whole sum it has applied for. So these technical default claims by payees seek and often achieve a draconian outcome. Smash and grab claims however often provoke subsequent disputes over what the true valuation of the construction works is, i.e. they don’t resolve anything themselves.

Another aspect of the payment provisions contained in the Act, is the right of the payee to suspend performance of any/all of its contractual obligations (e.g. carrying out the works) if a sum that should have been paid by the deadline, has not been paid. Such a right requires a 7-day notice of intention beforehand.

As for the final account process, standard form contracts provide for it, and it usually involves a procedure whereby each side puts forward its position, which is then agreed or not within a timeframe, so that a resolution does not drift indefinitely.

Retention in construction contracts is commonplace, namely where a small percentage of the contract sum is held on to by the employer, until its partial release at completion of the works and then full release at the end of a defect’s liability period.

Why Ridgemont?

Ridgemont’s team is made up of expert senior solicitors, all of whom previously worked in “Big Law” (i.e. the top 50 law firms in the UK).

We provide bespoke advice tailored to your needs.  Our advice is commercial and pragmatic, enabling you to use it effectively to make business decisions.

We have an expert understanding of construction law. We can guide you through the maze of payment for construction works.

We are user-friendly.  Our lawyers speak in plain English, providing service levels akin to “Big Law”. We have built our processes to make onboarding as pain-free as possible. Our fee earner structure means that you have access to a partner-level solicitor at all times and they will always be on top of your matter.

We operate our business in an ethical way.  That means we think about what the “right thing to do” is when making a business decision.  As an example, we do not charge a default unit of time for incoming emails or letters as we think we ought to be paid for work done, not for merely receiving correspondence. We are also open and transparent on what we charge, meaning our clients never receive a surprising invoice.

We provide “Big Law” service levels and quality of advice, with expert senior solicitors providing commercial, pragmatic advice. Necessarily, that does not come cheap as we have to invest in great lawyers and everything they need to do their job. However, due to us having comparatively lower overheads to “Big Law” firms, we are able to charge less than they would for providing the same service levels and advice.

We are proactive in finding innovative ways to advise our clients in a cost proportionate way.

Who we act for?

We act for developers, contractors, sub-contractors, professionals and investors across a range of sectors from residential to retail.

Your journey with us
  1. Get in touch using the contact form below, calling us on 0203 909 9590 or emailing us at
  2. We guarantee that we will be in touch with you the same day to listen to your needs and to explain how we can help and the likely cost.
  3. Assuming you wish to engage us, we will then onboard you as a client, which normally takes a matter of hours.
  4. From there, you will be assigned an experienced solicitor who will have conduct of your matter from cradle to grave and be available to speak to you and responsive to emails at every juncture.

You can learn more about our journey by watching these videos.

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Head of Construction

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