Payment notices and pay less notices: who owes what, and when

The single most valuable sentence in UK construction law is section 111(1) of the Housing Grants, Construction and Regeneration Act 1996:

Subject as follows, where a payment is provided for by a construction contract, the payer must pay the notified sum (to the extent not already paid) on or before the final date for payment.

Not the sum the payer thinks is right. Not the sum an adjudicator would eventually decide. The notified sum. If the payer wanted to pay less, there was a way to say so and a deadline for saying it, and if that deadline passed the argument is over for this cycle.

Subcontractors lose this money by not knowing the mechanism exists.

First: does the Act apply to you?

Three filters, and the third is the one that catches trades.

Section 104 defines a construction contract as an agreement for the carrying out of construction operations, arranging for others to carry them out, or providing labour for them.

Section 105 defines construction operations, in terms close to the CIS list, and excludes some: drilling for oil and gas, mineral extraction, and the assembly or installation of plant on certain process sites.

Section 106 excludes contracts with a residential occupier — "a construction contract which principally relates to operations on a dwelling which one of the parties to the contract occupies" or intends to occupy as a residence.

That last exclusion means the whole payment and adjudication regime is off for domestic work. Kitchen fitted for a homeowner: no statutory payment notices, no statutory adjudication, no statutory right to suspend. Same kitchen fitted for a main contractor on a development: fully inside the Act.

Section 109 adds one more: the right to payment by instalments does not apply where "the duration of the work is to be less than 45 days", or where the parties agree it will be.

The four notices, in order

The 2009 amendments, in force for contracts entered into on or after 1 October 2011 in England and Wales, produced a sequence. Learn it as a sequence, because each step has its own deadline.

Step 1 — the payment due date. Set by the contract. If the contract does not set one, the Scheme fills the gap: paragraph 7 of Part II makes any other payment due on the expiry of 7 days following completion of the work to which the payment relates, or the making of a claim by the payee, whichever is the later.

Step 2 — the payment notice (s. 110A). Not later than five days after the payment due date, a notice must be given specifying the sum considered due at the payment due date and "the basis on which that sum is calculated". It can come from the payer, from a specified person such as a contract administrator, or from the payee. Paragraph 9(2) of the Scheme sets the same five days where the contract is silent. The Act expressly says the amount "may be zero".

Step 3 — the payee's default notice (s. 110B). If the payer was supposed to give the notice and did not, the payee may give its own. That notice then sets the notified sum under section 111(2)(c). This is the provision that turns the payer's silence into the subcontractor's advantage — and it is the one least used.

Step 4 — the pay less notice (s. 111(3) to (5)). The payer, or a specified person, may give notice of an intention to pay less than the notified sum. It must specify "the sum that the payer considers to be due on the date the notice is served, and the basis on which that sum is calculated", and again the sum may be zero. It must be given "not later than the prescribed period before the final date for payment". Where the parties have not agreed a prescribed period, paragraph 10 of the Scheme makes it not later than seven days before the final date for payment.

Then section 111(6): where a pay less notice is given, the duty to pay applies only to the sum specified in it.

The Scheme's default calendar

If your contract is silent, this is what the timetable looks like for an instalment on a job under the Scheme:

For the contract price under a non-relevant construction contract, paragraph 6 makes payment due on "the expiry of 30 days following the completion of the work" or the making of a claim, whichever is later.

Read the table twice. The pay less notice deadline sits before the final date for payment, not after it. A pay less notice served on the day the money was due is late, and a late pay less notice is no pay less notice at all.

What happens when the payer just does not pay

Two remedies, and they work together.

Suspension, section 112. Where the section 111(1) requirement applies and is not complied with, the person owed may suspend "any or all" of their obligations. Three details make this stronger than most subcontractors realise:

• Seven days' notice of intention to suspend, stating the grounds, is required first (s. 112(2)).
• The party in default "shall be liable to pay to the party exercising the right a reasonable amount in respect of costs and expenses reasonably incurred by that party as a result of the exercise of the right" (s. 112(3A)). Demobilising and returning is recoverable.
• Time spent suspended "shall be disregarded in computing for the purposes of any contractual time limit" (s. 112(4)). You do not lose your programme by exercising the right.

Adjudication, section 108. Every construction contract must allow a party to refer a dispute to adjudication at any time, with a timetable to appoint the adjudicator and refer the dispute within 7 days, a decision within 28 days of referral, extendable by up to 14 days with the referring party's consent.

A "smash and grab" adjudication is nothing more exotic than an adjudicator being asked to confirm that a notified sum was never displaced by a valid pay less notice. Section 111(9) sets the consequence when an adjudicator decides more should be paid: the additional amount is payable within seven days of the decision, or the date that would otherwise have been the final date for payment, whichever is later.

Pay-when-paid

Section 113(1):

A provision making payment under a construction contract conditional on the payer receiving payment from a third person is ineffective, unless that third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent.

The clause is still printed in subcontracts. It is still ineffective. The only live exception is upstream insolvency, defined in section 113(2) to (5).

Note what section 113 does not do: it does not outlaw pay-when-certified. A clause tying your payment to a certificate under the main contract is a different animal, and it survives.

Five things worth doing on Monday

1. Find your payment due date and final date for payment in the contract, and write them into a calendar with the two notice deadlines counted off them. Two dates and two deadlines per cycle.
2. Serve your own application as a section 110A(3) payee notice, with the sum and the basis of calculation, and serve it on time. Get the wording into the template once — the practical mechanics of turning a stage of work into that application are in invoice for building work: stages, variations, retention.
3. Diary the day after the pay less deadline. If nothing has arrived, the notified sum is due in full.
4. If a pay less notice arrives, check two things: was it in time, and does it state the basis of calculation? A bare figure is vulnerable.
5. Do not suspend without the seven days' notice. Suspension without notice is a breach by you, and it converts a strong position into a weak one.

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Position as at 29 August 2026. This article describes the law and is not legal advice. Part II of the 1996 Act was substantially amended by Part 8 of the Local Democracy, Economic Development and Construction Act 2009, in force for England and Wales on 1 October 2011 and for Scotland on 1 November 2011; contracts entered into before then are governed by the earlier text. Northern Ireland has its own corresponding legislation.

What Zirko does here: applications for payment, the dates they were sent and the documents behind them stay with the project instead of in a mailbox, so the question of what was served and when has a file rather than a recollection behind it. Zirko does not serve notices for you and does not know your contract's payment terms unless you record them.