In six months' time - if the Government's target date of October 2011 is met - many of the familiar provisions of Part II of the Housing Grants, Construction and Regeneration Act 1996 will be swept away, when Part 8 of the Local Democracy, Economic Development and Construction Act 2009 is brought into force.
Here are our top five points for you to consider before then.
- All of your construction contracts will need to be amended if you wish them to comply with the new legislation. The industry bodies such as SBCC, JCT and NEC will soon publish updates to their standard forms - but any bespoke schedules of amendments or bespoke contracts you may use, e.g. your own sub-contract terms and conditions, will need to be revised and updated. Some changes to the adjudication provisions will be necessary, but the most significant changes relate to the payment arrangements, which are the subject of complex statutory provisions.
- You will have to change your procedures. Just when everyone was finally getting used to the payment procedures under the 1996 Act, the "section 110" payment notice will disappear - and so will withholding notices! Instead, either the payer or the payee must issue payment notices, and if the payer thinks a lesser amount is payable, the payer must serve a "pay less" notice - failing which the notified sum will be payable.
- You will need to train your staff. They need to be familiar with the new payment procedures and they need to be ready to serve new forms of notice.
- You should be aware that the consequences of failure to serve the correct notices are more severe. If you are a payer and fail to serve the correct notice, this could result in you having to pay the payee whatever it has claimed - even if you think the amount is excessive. If you are a payee and fail to promptly serve the correct notice, this could significantly delay payment to you.
- You should be aware that the consequences of non-payment are more severe. The new legislation makes it clear that if a notified sum is not properly paid, the unpaid party can suspend performance of any or all of its obligations - and the unpaid party will have a statutory right to be paid its costs and expenses of doing so.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
