“Why do Contractors think it is okay to not pay you, yet still expect you to continue to work on site as and when they want?” This was the question thrown straight at me before I could even shake the hand of the person who asked it.
“So you’re having payment problems then?” I answered.
“Well what can we do?” I was asked.
“Suspend works on site” I responded.
“Better in fact, are they pushing for you to start works in a specific area?” I asked.
“Yes”, was the sharp response, “they (the Main Contractor) need us to start works in the Main Hall”.
Sensing his frustration I said, “I’m glad you told me that, this is good news for you.”
“Why?” he asked, still sounding annoyed but looking intrigued.
At this point I removed from my shoulder bag, a copy of the Housing Grants, Construction and Regeneration Act 1996 with the sections updated to take into account the changes introduced by Local Democracy, Economic Development & Construction Act 2009, and handed it to the client.
Understanding how HGCRA 1996 can help
“Go to Section 112 and read out paragraph (1),” I told him.
“Where the requirement in section 111(1) applies in relation to any sum but is not complied with, the person to whom the sum is due has the right (without prejudice to any other right or remedy) to suspend performance of any or all of his obligations under the contract to the party by whom payment ought to have been made”.
“What does this mean?” I was asked.
“It means that you can suspend any or all of your obligations under your Contract with your Client,” I duly told him
I elaborated and told him that the changes brought about by the introduction of the 2009 Act gave more power to Subcontractor’s. A difference in the paragraph he had read out, from the original Section 112 under the 1996 Act, included the words ‘any or all’. In my opinion, this slight change gave more power to Subcontractor’s, as it enabled them to maintain a site presence and continue to work in certain areas, whilst at the same time allowing them to suspend works in specific areas, thus still applying pressure to the Payer to make Payment.
“So how do we suspend the works then”? He asked.
“We send your client a letter today, referring to this section of the Construction Act and issue them with seven days’ notice of your intention to suspend your works in the Main Hall, unless your outstanding payment is received (cleared funds in your account) within seven days of the letter.
“Okay, that sounds good”, he said. “Can you write the letter for me?” He asked.
“Of course I can”.
Threatening suspension of work to encourage payment
After checking the formalities of the contract and ensuring the sum outstanding was valid, I drafted the letter on behalf of the client who, once it was completed, signed it and sent it by Fax, Email and 1st Class Registered Post; just to ensure that there could be no excuses from their client, claiming they had not received it.
“So now what?” I was asked.
“You have to wait, but be prepared; you may have to enforce the suspension of the works in the Main Hall until you are paid. If you back down and start the works without payment, any future letters you send will probably be dismissed and you may not be taken serious.”
“I won’t back down” He said.
“Good”. I said.
Three days later my phone rang,
“We have just received a remittance, payment made by BACS today, it will be in our account on Tuesday”.
Sensing the joy in his voice, “Brilliant”, I told him.
“I am going to use this tactic (referring to the letter) more often,” he said.
“That’s a good idea,” I told him.
Main Contractors delaying payment is commonplace within our industry. I often find that Subcontractors do not know they have the right to suspend works for non-payment; in many cases they have never even heard of the Construction Act. This lack of understanding and awareness of the Construction Act only benefits the Main Contractors and Employers of the industry. Subcontractor’s need to enhance their knowledge, especially if they are to improve their payment issues.
If the above is something that you have encountered or, are currently encountering and you need some assistance in dealing with the situation, please do not hesitate to get in touch with us. We will review your situation and provide you with advice on progressing and resolving your payment problems.