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• Proposals for Change in the Construction Act

Introduction

On the 20 June 2007, the Department of Trade and Industry issued consultation papers on proposals to amend Part 2 of the Housing Grants Construction and Regeneration Act 1996 and the Scheme for Construction Contracts (England and Wales) Regulations 1998.

The Act when introduced had the aim of ensuring prompt cash flow and allowing the swift resolution of disputes by way of Adjudication. In summary, it achieved this by:-

• Providing a statutory right to refer disputes to Adjudication
• Providing the right to interim periodic stage payments
• Requiring that Contracts provide a mechanism stating when payments become due together with a final date for payment
• Requiring that communication be given in respect of amounts to be paid
• Introducing a system of withholding notices in respect of monies and work in dispute
• Allowing the payee to suspend performance where sums due are not paid
• Prohibiting pay when paid clauses linking payment to payments received by the payer, under a separate Contract.

To allow construction companies to better manage cashflow, the new payment framework proposals seek to improve clarity to the existing statutory measures by:-

• Reducing the unnecessary duplication of payment notices .
• Simplifying the requirement to serve a Section 110(2) payment notice .
• Clarifying the content of payment and withholding notices .
• Ensuring the payment framework creates a clear interim entitlement to payment.
• Prohibiting the use of pay when certified clauses whereby a main contractor is only obliged to pay a sub contractor when payment to the main contractor is certified under the main contract.

The proposals seek to further encourage parties to resolve disputes by Adjudication rather than using such costly measures as litigation by:-

• Applying the legislation to oral and partly oral contracts.
• Preventing the use of agreements that interim payment decisions will be conclusive which effectively avoids adjudication in interim payment disputes.
• Ensuring fairer allocation of adjudication costs.

Proposals to improve the right of suspension include:-

• Allowing further rights to a suspending party to claim resultant costs and delay.

Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.