When a main contractor will not pay you

First, work out whether the Act applies to you

It applies to construction contracts carried out in England, Wales, Scotland or Northern Ireland. Since October 2011 it covers oral and partly oral contracts as well as written ones, which matters in a trade where a lot gets agreed on site.

The big exclusion is section 106. The Act does not apply to a contract with a residential occupier: work on a dwelling that the other party occupies or intends to occupy as their home. So a homeowner extension, direct for the homeowner, is outside it. But if you are subcontracting to a builder who is working on that same house, your contract is with the builder, not the occupier, and you are back inside the Act.

There are other carve-outs, mostly for process plant, mining, and manufacturing or delivering components where the contract does not also cover installing them. For a normal trade subcontract on a normal building, you are in.

The notice regime, and why silence is on their side of the ledger

The Act sets up a sequence, and the sequence is where subcontractors win. Every payment has a due date and a final date for payment. Within five days of the due date, the payer has to give a payment notice saying what they think is due and how they worked it out.

If they do not, your own application or invoice becomes the default payment notice, and the amount on it becomes what the Act calls the notified sum.

To pay you less than the notified sum, the payer then has to give a pay less notice before the final date for payment, again saying how much and how it was calculated. If they miss that too, they have to pay the notified sum in full, whatever they think of the work.

This is the mechanism that gets called a smash and grab, and it is a real thing that real subcontractors use. It also means the most valuable habit on site is boring: put your applications in on time, in the form the contract requires, and keep proof of when you sent them. A late or informal application is the usual reason this does not work.

The right to stop work

If the notified sum is not paid in full by the final date for payment, section 112 gives you the right to suspend performance of any or all of your obligations. You have to give at least seven days' written notice first, saying why.

Two things make this stronger than it sounds. You are entitled to a reasonable extension of time for the period you were suspended, so it does not put you in breach on programme. And you can recover the reasonable costs and expenses of suspending and starting again.

It is a serious step and it will make the relationship worse. But it is a lawful step, which is more than can be said for walking off site without notice, and the notice itself frequently produces the payment.

Adjudication: the fast route most subcontractors never use

Section 108 gives either party the right to refer a dispute to adjudication at any time. The adjudicator has 28 days from the referral to reach a decision, extendable by 14 days with the referring party's agreement or longer if both agree. The decision binds both of you until it is finally settled by a court, an arbitration or an agreement, which in practice usually means it settles the matter.

This is enormously faster than a court claim, which is the point of it. The cost is the catch: the adjudicator charges a fee, and each party normally bears its own costs regardless of who wins, so on a modest sum the economics can be poor. On a large retention or a disputed final account it can be the best money you spend.

If your contract has no adjudication clause, or a non-compliant one, the Scheme for Construction Contracts fills the gap and you can still adjudicate.

Pay when paid is not a defence

Section 113 makes pay-when-paid clauses ineffective. A main contractor cannot make your payment conditional on being paid by the client above them. The one exception is where the party above is insolvent.

Since October 2011 the same applies to pay-when-certified: a clause making your payment conditional on somebody else certifying work under a different contract is also ineffective.

This is worth knowing because it is still said out loud on sites all the time. If you are told the money is not coming because the client has not paid the main contractor, that is an explanation, not a legal position.

What to do this week if you are not being paid

Get the contract, whatever it is. A signed subcontract, an order, an email chain agreeing a rate. You need to know the due dates and the final dates for payment, and if there is nothing written, the Scheme's default timings apply instead.

• Check whether they served a payment notice within five days of the due date. If not, your application is the notified sum.
• Check whether a pay less notice arrived before the final date for payment. If not, the notified sum is payable in full.
• Put your position in writing, quoting the dates and the sections. Contractors' commercial teams know exactly what this means, and a subcontractor who cites the notice dates is treated differently from one who complains.
• If it stays unpaid, serve a seven day notice of intention to suspend.
• If the amount justifies it, refer it to adjudication rather than waiting for the courts.
• Keep every application, every notice and every date. This whole regime turns on who sent what and when.

And if the contractor goes under

None of the above helps much against an insolvent company, and construction insolvencies are common. You become an unsecured creditor, which usually means recovering little or nothing, and any retention held is likely to be gone with it.

The protection is upstream of the problem: check who you are working for at Companies House before you start, watch for repeated late payment as a warning sign rather than an irritation, and be careful about how much exposure you let build up with one contractor. If a main contractor already owes you two months of applications, the answer to a third month is not more work.

Common questions

Can a main contractor refuse to pay me until they get paid?

No. Pay-when-paid clauses are made ineffective by section 113 of the Housing Grants, Construction and Regeneration Act 1996, except where the party above them is insolvent. Being told the money has not come down the chain is an explanation, not a defence.

Can I stop work if a contractor has not paid me?

On a contract covered by the Construction Act, yes. If the notified sum is unpaid by the final date for payment you can suspend performance after giving at least seven days' written notice, and you are entitled to an extension of time and to the reasonable costs of suspending and resuming.

What is adjudication and is it worth it?

It is a statutory fast-track dispute process: you refer, and the adjudicator must decide within 28 days of the referral. It is far quicker than court and the decision binds both sides until finally determined elsewhere. The adjudicator charges a fee and each side usually bears its own costs, so it suits substantial sums better than small ones.

Does the Construction Act apply to work in someone's house?

Not if your contract is directly with the person who lives there, because section 106 excludes contracts with a residential occupier. If you are subcontracting to a builder working on that house, your contract is with the builder and the Act does apply to it.

What is a pay less notice?

It is the notice a payer has to serve before the final date for payment if they intend to pay less than the notified sum, setting out the amount they consider due and the basis for it. Without a valid one, they have to pay the notified sum in full even if they dispute the work.

Do the maths

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All of it, in the order you need it, on the getting paid hub.

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