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.
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.
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