Construction projects can be complex and susceptible to cost increases and delays. Large sums of money are at stake more often than not, putting contractors under increasing cash flow pressure, making prompt payment a crucial factor.
In this article, we touch on the complexities of payment in the construction industry and look at one of the methods to quickly resolve payment issues.
Payment Practice in the Construction Industry
There are several ways a company can improve payment practices in the construction industry; it is best to start at the very beginning. First, the contractual relationship between a contractor and a client is vital. Standard forms like JCT and NEC contracts set out detailed payment mechanisms; however, many agreements involve bespoke terms, or in some cases, no formal terms are in place.
The type of contract will determine when a contractor is entitled to payment. While the parties involved are free to agree on their payment terms, it is essential to note that, where the terms are deficient or no terms agreed that specific legislation in the Housing Grants, Construction and Regeneration Act 1996 (as amended) and secondary legislation, the Scheme for Construction Contracts(as amended) serve to incorporate terms where the parties payment mechanism is deficient.
Common Dispute Issues
Contractors’ disputes often manifest themselves in non-payment of sums considered due but often involve issues of:
payment for additional works or variations
compensation for other losses caused by delays or disruption
release of retention monies
Construction contracts carry a statutory right to refer disputes to Adjudication. The law is slightly different for parties where one party is a homeowner; however, contractual adjudication may be agreed upon.
An adjudication is a form of dispute resolution that allows parties to get a binding decision without lengthy and expensive court proceedings.
Watch our video on debt recovery
Call our Construction Debt Recovery Team for More Information.
A party to a Construction Contract may only refer a matter to adjudication if a dispute exists and is crystallized between the parties.
Notice of Adjudication
The adjudication process commences when the Referring Party issues a Notice of Adjudication to the Respondent. The Notice must set out briefly:
The nature and a brief description of the dispute and parties involved
details of when and where the dispute has arisen
The nature of redress sought, and
The names and addresses of the parties.
Appointing an Adjudicator
An Adjudicator has to be appointed within seven days of the Notice of Adjudication being served. Depending on what the contract says, this may be done by any Adjudicator Nominating Body (ANB). It usually costs between £250.00 – £425.00 for the nominating body to appoint an Adjudicator.
The appointed Adjudicator will then confirm their appointment with both parties involved in the dispute.
The Adjudicator will issue directions and a timetable allowing the Respondent to give a Response to the Referral Notice.
The Adjudicator will then issue directions and a timetable. They will allow the Respondent to give a Response to the Referral Notice. Depending on the contractual agreement, the Respondent usually has between 7 to 14 days to respond to the Referral Notice.
The Adjudicator may allow the Referring Party to Reply to the Respondent’s Response.
The Adjudicator may ask for a meeting, visit a site, or consider sufficient information to issue a decision.
Unless the parties extend the adjudicator’s time, the Adjudicator must issue their decision within 28 days of receiving the Referral Notice.
The Adjudicator’s decision is binding on the parties and enforceable by the process of summary judgment in the High Court.
Construction debt recovery doesn’t have to be a long, arduous process. However, taking time, in the beginning, to get the proper contract in place with reasonable terms and conditions and an adequate payment mechanism and dispute resolution process can assist in resolving potential disputes and speeding up payments.
Adjudication is a statutory and quick process to receiving a binding decision on your dispute if things go awry.
While Adjudication is not the final determination of the parties’ rights in most circumstances, the Adjudicator’s decision is accepted as a final step.
Our commission rates are competitive and flexible, irrespective of the size or volume of debt. Our debt recovery services operate on a strictly No Win, No Fee basis, ensuring we’re invested in your success. Let First Capitol help you regain control over your financial situation today.
We specialise in collecting most types of debts in the UK which originate from; Business-to- Business Invoices, Debts Relating to Services Agreements, Unregulated Business Loan Agreements, Individual/Personal Loan Agreements (not regulated by the Consumer Credit Act),
Commercial and Private Rent Arrears.
Mayfair House, 11 Lurke Street Bedford, Bedfordshire MK40 3HZ United Kingdom
First Cap, First Capitol Collections, First Capitol Collections & Investigations, First Capitol Group,
We Buy Any Debts , The Debt Recovery Agency are all trading styles. We are not a “law firm” and its; directors, employees and agents neither offer nor can give legal advice. Any information contained in this website is provided as general information only and therefore does not constitute legal advice. First Capitol Limited, Mayfair House, 11 Lurke Street, Bedford, MK40 3HZ. Company Registration No. 09631772. Powered By SEO Vikings | Designed By Zero Three Digital
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.