Changes to the Construction Act

07-Sep-2011

Changes to the Housing Grants, Construction and Regeneration Act 1996 ("the Construction Act")

 

With the implementation of Section 8 of the Local Democracy Economic Development and Construction Act 2009 (the LDEDC Act) on 1 October 2011 a number of changes will be introduced that are likely to affect anyone involved in providing or procuring construction services. The LDEDC Act makes a number of amendments to existing legislation in terms of payment and adjudication procedures as well as expanding the scope of agreements to which the legislation applies. Set out below is a brief summary of the changes:

 

1. There will no longer be a need for agreements for construction services to be in writing before the Construction Act applies.

 

2. So called “paid when certified” clauses will be prohibited. This means payment under a construction agreement cannot be dependent upon performance under another separate agreement (e.g. payment to a sub-contractor cannot be subject to the main contractor’s performance under the main contract).

 

3. Notice of payments due can be given by either party to an agreement, rather than, as previously, just the party making payment. The party receiving payment can also issue notice should the payer fail to do so.

 

4. Existing “withholding notices” will become “notices of intention to pay less”. The notice and application of these will change, potentially to the detriment of parties due to receive payment under construction agreements.

 

5. A party who suspends his performance for non-payment will be entitled to recover reasonable costs incurred as a result of such suspension. Parties will also be able to choose to suspend only part of the services as opposed to the current “all or nothing” situation.

 

6. All adjudication provisions in construction agreements will have to be in writing.

 

7. An adjudicator will have the power to correct his decision in the event of any typographical or clerical error made by accident or omission.

 

These changes will mean that all development agreements, building contracts, sub-contracts, professional appointments and any other documents under which construction services are provided will need to be reviewed carefully to ensure they comply with the new legislation.

 

If you would like any more information regarding the changes under the LDEDC Act, or in relation to our expertise in construction generally  contact Simon Franklin

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