When you need one
Under section 111 of the Housing Grants, Construction and Regeneration Act 1996 (as amended in 2011), the payer must pay the notified sum by the final date for payment. The notified sum is the figure in the payment notice or, if no payment notice was given, the sum in the payee's application or payee's notice where the contract allows. To pay less than that, the payer must give a pay less notice.
What it must contain
- The sum the payer considers to be due on the date the notice is given.
- The basis on which that sum is calculated: enough detail for the subcontractor to see how you reached it, line by line where you have reduced the valuation, and each contra charge with its reason.
- It must be given no later than the prescribed period before the final date for payment. Your subcontract sets the period; where the Scheme for Construction Contracts applies, it is 7 days before the final date.
- It must be in writing and served as the subcontract requires (the address, the method and who it goes to).
A layout you can copy
[Your company letterhead]
[Date]
To: [Subcontractor name and address]
Pay less notice
Subcontract: [reference and works], [project]
Application for payment: No. [number], valuation date [date]
We give notice under section 111 of the Housing Grants, Construction and Regeneration Act 1996 and clause [number] of the subcontract that we intend to pay less than the notified sum of £[notified sum].
The sum we consider to be due on the date of this notice is £[sum], calculated as follows:
Gross valuation to date £[ ]
Less retention at [ ]% £[ ]
Less contra charges £[ ] ([each charge and its reason])
Net valuation to date £[ ]
Less previously certified £[ ]
Sum considered due £[ ]
Reductions from the application: [line reference], applied £[ ], valued £[ ], because [reason]. [Repeat for each line.]
For and on behalf of [company]
[Name and position]
Mistakes that make a pay less notice fail
- Too late. A notice given after the deadline is likely to be ineffective, and the notified sum is then payable in full. Work the deadline out from the final date, not from when the application arrived.
- No basis. A bare figure, or "as per our assessment", does not show how the sum was calculated.
- Served the wrong way. An email to someone who has left, or a method the subcontract does not allow, can mean the notice was never given.
- Treating a payment notice as a pay less notice. They are different notices with different deadlines. If you issued a payment notice and then find a defect, a pay less notice can still follow, before its deadline.
This page explains the general position under the Act. It is not legal advice: check your subcontract, and take advice on any dispute.
Let the deadlines come to you
Constructicore works out every payment notice and pay less deadline from each subcontract's terms, reminds the people who issue notices before each one, and issues the notice on your letterhead with the basis calculated line by line and a reason for every reduction. See Constructicore for main contractors, or work out a set of dates now with the free payment date calculator.