28-03-2022
Jonathan Nugent, Managing Director at
Arbicon, provides steps to take in challenging a pay less notice and recovering
payments due.
The construction industry is
unfortunately rife with payment issues, whether that be due to problems with
the construction works, overpayment or underpayment, damages/loss, late payment
or complete non-payment. Of course, there is also the human factor of lack of
care and attention or deliberate intent! Whatever the position, The
Construction Act stipulates that any party who intends to withhold money from a
payment otherwise due, must give prior written notice – the Pay Less
Notice.
The purpose of a Pay Less Notice
is to give the paying party the legal right to pay less than/withhold all or
part of an already notified sum, altering the payment due to the payee near to
the end of the payment cycle. The Pay Less Notice must specify the ‘notified
sum’ for payment, and the basis on which the sum has been calculated, even if
that is zero or negative.
Below are our steps on how to
challenge a Pay Less Notice if you disagree with it:
Step 1 –
Check the Pay Less Notice is Valid
Providing that
you have made a valid payment application, and the contract requires or allows
you to make such an application, if the paying party have failed to serve the
initial ‘Payment Notice’ within 5 days of the contract Payment Due Date, the
payment application automatically becomes a Default Payment Notice and the notified
sum due, but subject to the issue of a Pay Less Notice.
If a Pay Less Notice has not been
validly served, the Notice is of no effect, and if the paying party fails to
pay the previously notified sum, believing their Pay Less Notice stands, go to
step 2 or an adjudication can be commenced, arguing the payment is due in
Default.
Step 2 –
Negotiate the Pay Less Notice
If you disagree with the Pay Less
Notice, raise your objections and seek to negotiate why they are wrong or a
different payment. For example, contra charges, damages, blame, losses for
delays or abatement for quality suddenly appear in the penultimate evaluation
in a Pay Less Notice.
Often effective communication can
resolve the alleged issues and enable the paying party to re-assess their
valuation of your payment.
Step 3 –
Formally Challenge the Pay Less Notice
If the payer will not stand down
and the dispute escalates, the Pay Less Notice, if validly served, will need to
be challenged formally through adjudication.
In Summary
Challenging a Pay Less Notice can be complex, it is recommended not to challenge it alone, but to instead:
- instruct Arbicon to evaluate your account and legal position/validity of payment notification.
- engage Arbicon as a third-party negotiator/advocate and to set out your position.
- If nothing changes, engage Arbicon to action an adjudication.
Please use our contact form or call our offices below:
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