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15 August 2011 | Adam
Leach
A UK law is changing to
encourage companies to settle bills with construction contractors promptly.
The change is happening to
the Housing Grants, Construction andRegeneration Act 1996 from 1 October. It means that once money is due, the payer has five days to
issue a payment notice with the final amount owed. If they do not, the supplier
can issue default notice for the amount it believes it’s owed. If the payer
believes the default notice claims too much money, it has seven days to issue a
‘pay less notice’. If it doesn’t issue this notice within a week, it will be
forced to pay whatever amount the supplier claimed in its default notice.
Until now, there has been
no penalty for those who drag their feet over payment.
Rebecca Evans, a solicitor
at Thomas Eggar, said: “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.”
When
it is passed into law, the legislation will also change the way contractors and
sub contractors handle payment. From 1 October, payments to sub-contractors can
no longer be made contingent on receiving payment from the main contractor.
The changes apply to any
construction contract entered into on or after 1 October.
☛ See the law update in the September issue of Supply Management for more information
