Jonathan Nugent, Managing
Director at Arbicon, explains Pay Less Notices and what to do if you receive one.
A Pay Less Notice is the opportunity for a paying party to change their mind on what has already been agreed in the construction contract, altering the payment due to the payee near to the end of the payment cycle. It is a legal “Payment Notice” that sets out the “notified sum” for payment even if it is zero or negative. If you have a received a Pay Less Notice then it means that your payment is now not going to be paid in whole or in part.
If a Pay Less Notice is validly served it is the sum due and can only be overturned by an Adjudicator, Arbitrator or the Court. It means your payment is being legally reduced and you potentially have a dispute. If you are served a Pay Less Notice which you disagree with, you can take formal proceedings such as Adjudication and seeking professional help is important to ensure your dispute is taken forward appropriately.
Conversely, if you are the paying party and you have failed to serve the initial “Payment Notice” within 5 days of the contract Payment Due Date and the payee has made a valid payment application which is required by the contract, if you do not serve a valid Pay Less Notice, it means the payee’s payment application becomes a Default Payment Notice automatically and the sum due. You lose the chance to challenge the payee and must pay what the payee has asked for.
With Covid-19 causing many delays in the construction industry and cash flow becoming more difficult, we have put together an Advice Guide on Pay Less Notices, where we answer FAQs on Pay Less Notices.
Despite the detailed statutory law on payment in construction contracts being in place for almost 10 years, it is still not always understood and leaves many confused.
If a dispute arises from a Pay Less Notice being served, Arbicon can evaluate the validity and the content, including the actual value of work done at the Pay Less Notice date and the spurious or otherwise reasons for paying less. Our expert team can take the matter to adjudication and recover payments due. If you would like any guidance or advice, please contact Arbicon on firstname.lastname@example.org or call 01733 233737.