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Legalese: Payment

New payment legislation will make being an architect easier, writes Peter Stockill

The amendments to the 1996 Housing Grants, Construction and Regeneration Act (HGCRA) apply to all construction contracts, as defined in the act, entered into from 1 October in England and Wales and 1 November in Scotland. What will this mean for architects? The main areas of change will be to payment mechanisms and adjudication procedures.

Payment

1. The headline change involves payments of architects’ fees. Before the amendments, while your client could not raise a counterclaim to your fees without submitting a withholding notice, in most cases they could still argue that the sum claimed was not ‘due under the contract’ by arguing, for example that your work had not reached the required stage.

Under the new regime, in the absence of a withholding (now a ‘pay less’) notice, your client is obliged to pay the sum specified in the payment notice. Significantly, if they do not serve a payment notice, you can do so, or, if your appointment makes provision for you to apply for payment (stating the sum you consider due and the basis upon which it is calculated), and you have done so, that may be treated as the payment notice. The sum applied for then becomes the sum payable.

2. The amendments prohibit ‘pay when certified’ clauses in most contracts, i.e. clauses that state that payment under a sub-consultancy agreement is conditional upon it being certified under the main contract. In my experience, consultants acting for design and build contractors
have been required to observe such terms. They can now be rejected.

3. Your statutory right to suspend your services for non-payment will now be enhanced. You will be entitled to suspend part or all of your services, to reimbursement of reasonable costs and expenses involved in suspending them and time, not just for the period of suspension but also for winding down and gearing back up again.

4. Anyone involved in preparing appointments and dealing with payments should familiarise themselves with the new legislation and updated standard forms. If (or to the extent that) the payment provisions of your appointment do not comply with the amended act, the Scheme for Construction Contracts will apply, This has also been amended for consistency with the act.

Adjudication

1. The most important change to adjudication is that statutory adjudication will be available for contracts that are oral or partly oral, and therefore in a much wider range of cases avoiding jurisdictional arguments over whether a contract is entirely in writing. However, you will still be required to show that there was a contract to begin with.

2. If you wish to have a contractual adjudication procedure in place, you must set out certain minimum requirements in writing (Section 108 of the act now empowers adjudicators to correct clerical or typographical errors in their decisions). If your procedure does not comply, it will be replaced by provisions in the Scheme for Construction Contracts.

These changes apply to subcontracts and main contracts as well as professional appointments, so if you act as contract administrator you will need to ensure that you follow the correct procedures for each contract. There will inevitably be arguments and uncertainty while the new legislation beds in, but it offers several benefits to architects and many of the potential problems can be designed out in advance.

Peter Stockill MSc FCIArb is an associate at law firm Berrymans Lace Mawer, which operates the RIBA Legal Helpline

Glossary

Payment notice A notice stating the amount that the person presenting it (who under the new act could be the payer, the payee or a person specified by the contract) considers due on the payment due date, and the basis on which it is calculated

Pay less notice Notice of the payer’s intention to pay less than the amount stated in the payment notice

Sub-consultancy agreement A contract under which a party engages someone else to carry out some of the professional services it has been contracted to undertake

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