Wise Up Wednesday – Don’t Get Angry Get Paid!
If you don’t get paid your business fails. It’s that simple!
Ask any insolvency practitioner and they will confirm that lots of otherwise profitable businesses fail because they don’t collect what’s owed to them.
Of course actually getting paid is sometimes easier said than done, and it’s one of the problems StreetwiseSubbie are most commonly asked to help our members with – and one which Barry Ashmore has personally been advising Specialist Contractors about for the last 32 years.
So Don’t Get Angry Get Paid
You can greatly improve how successful you are at getting paid by understanding these key points:
- The payment provisions of a contract should be clearly established and fully understood
- Prior to the Construction Act (where it applies) you had no automatic right to interim payments, and no payment notices, no suspension, no adjudication etc., so despite it being a bit complicated the Act is good news for Specialist Contractors
- Most standard form contracts have provisions entitling you to interim payments, with clear rules set out as to how these should be calculated and when they should be made
- So, first things first please make sure you understand the contract and whether or not it complies with the Act
- Be aware that the Construction Act does not apply to all contracts
- There are certain types of project to which the Act does not apply, e.g. where the contract is with a “residential occupier” (the homeowner to you and me) and other situations where the Act doesn’t apply include supply only contracts, process industry and power generation sites (a full list is set out in the Act).
Can I Stop Work If I’m Not Getting Paid?
This is a question that we regularly get asked and it is one that you need to consider very carefully, because stopping work without the right to do so can be very financially harmful and actually decrease your chances of getting paid. Of course there are always exceptions to the rule such as a Contractor’s imminent insolvency. The best thing you can do is give us a call before stopping work, but, here are some general points to bear in mind:
- Unless the Act applies or the contract provides for it, there is no common law right to suspension of the works in the event of non-payment
- Unless there is an express provision in the contract, or the Act applies you will be in breach of contract by stopping work
- Once you’re certain of the terms of your contract, the right of suspension can be the most effective weapon in the fight to get paid on time
What Are The Payment Rules
Every contract is different so you need to check and understand the specific payment terms of the contract, but the Construction Act and in particular the 2011 amendments introduced some key rules about payment:
- Contracts are required to clearly establish the “Due Date” and “Final Date for Payment” – confusingly the Due Date isn’t when the money is due to be paid, but the Final Date is the last date by which you must be paid
- The act does not preclude lengthy timescales – negotiate them!
- The contract must also provide for Payment Notices to be issued by the paying party, and if they are not provided there are favourable default provisions
- But, watch out because most Contractors will try and bend the rules in their favour by way of their own terms or amendments to the Standard forms such as JCT and NEC/3
- Understanding the rules is crucial if you want to win the payment game!
What About Retention?
We would love to see retention confined to the history books, but sadly it is very unlikely that is going to happen any time soon. So, in the meantime here are few points:
- Retention provisions should be clearly established and the triggers for payment agreed
- Retention monies are typically 3-5% of the overall value of your contract
- Usually, retention monies are released in two halves, or moieties: the first when your works reach practical completion, and the second at a predetermined date
- The Main Contract usually has a “Defects liability period” at the end of which he is under obligation to complete the making good of defects
- When he has remedied all the defects a “Certificate of Making Good Defects” is issued
- The release of your retention can no longer be linked to the issue of such a certificate
- If you complete your own defects but release of retention monies is delayed due to a default of the Contractor to complete other defects, the Contractor may be liable for payment of outstanding retention
- In order to get around these problems main contractors are putting ridiculously long timescales in for release of retention (negotiate them!)
Still Not Getting Paid?
If despite your best efforts you are still not getting paid then it’s time to escalate matters. That can be done in a number of different ways depending on the circumstances, and we can assist you with all of that, and as our initial advice is free why not give us a call?
Don’t hesitate to pick up the phone and call Streetwise Subbie today if we can help you with payment, or any other contractual issues.
I hope you enjoyed this ‘Wise Up Wednesday’ post and that it gave you some food for thought.
Finally, please remember if you need any support please take action sooner rather than later. If you’re not sure what you need, or just want a second opinion, please give us a call on 01773 712116, or email info@streetwisesubbie.com
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