For the specialist contractor, receiving less money than was agreed for a job can be extremely distressing. Not only can it impact negatively on cash flow, in some cases it can lead to the complete demise of the business.
But what many subcontractors still don’t realise is that main contractors often fail to follow the law under the ‘new’ Construction Act when it comes to reducing payments to you. So don’t just assume you will have to accept less money than you are owed.
First, take a look at these typical mistakes that main contractors make that can leave you with the upper hand:
They don’t revalue the work at the date of the Pay Less Notice
The most important error that a main contractor makes is that they don’t revalue the work at the date of the Pay Less Notice. They always rely on the interim valuation; in that case the Pay Less Notice is invalid and you are entitled to the amount you applied for.
They fail to specify the sum they consider to be due on the Pay Less Notice
The main contractor must state in the Pay Less Notice both the amount they believe they owe you and the amount they intend to withhold. Otherwise the Pay Less Notice is invalid.
They don’t explain in the Pay Less Notice how they came to calculate the sum they say is due
It is vital the main contractor includes this information as otherwise the Pay Less Notice is invalid. By getting an explanation of the basis for their calculation, you can get an idea of which aspects of the work the main contractor is claiming were substandard and whether this is justified.
They fail to issue the Pay Less Notice on time
The main contractor must issue the Pay Less Notice an agreed number of days before the Final Date for Payment. If they miss this deadline, you are entitled to the full amount detailed in the Payment Notice.
They don’t issue a Pay Less Notice at all
In a recent survey we carried out, 75% of the subcontractors we surveyed said that in almost 50% of the projects where they were underpaid the main contractor did not issue a Pay Less Notice as required of them by law. In every one of those cases, the subcontractor could have claimed 100% of what they were owed.
As you can see, there are numerous ways a main contractor can mess up the correct procedure for Pay Less Notices. Unfortunately, there are even more subcontractors who simply don’t realise this works in their favour.
Managing director of PJE International Ltd, Peter English says: “I have lost count of the number of times a subcontractor has come to us in a panic because of the threat of underpayment, only for us to find that the main contractor hasn’t followed the correct procedure and owes them the full amount.”
Do you need advice on a Pay Less Notice?
If you need advice on whether a Pay Less Notice is valid or whether you can take the matter to adjudication, feel free to contact our team of dispute management specialists for a no-obligation chat on 0116 241 5599.