Changes to the Construction Act
Wed, 21 Dec 2011 16:33:41 GMT
Changes to the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act” or “HGCR”) apply to all construction contracts in England and Wales from 1st October 2011 and those in Scotland from 1st November 2011. They are likely to apply to contracts in Northern Ireland in the future.
ALA view these changes as positive, particularly for smaller contractors and subcontractors, although one down side is that the construction industry will be operating two sets of provisions since the application of the amended Act is not retrospective to contracts entered into prior to 1st October 2011.
The changes will impact principally on two key areas, Payment and Adjudication and the NEC suite of contracts (and other standard forms) have been amended (September 2011) to accommodate the new legislation. It should be noted however, that the amended NEC3 should only be used where contracts fall under the HGCR.
Changes for payment Provision
Section 110A overhauls the previous provisions with regards to payment notices. Where a contract relies on issue of a payment certificate, the certificate itself and details of how the payment was calculated must be issued together and these documents will constitute the payment notice. If a contract has no provision for the issuing of a certificate prior to payment, such as the Professional Services Contract, the payee’s application or invoice will be deemed to be the payment notice. The issue of the payment notice must be issued not later than 5 days after the payment due date.
Section 111 does away with the previous requirement on the payer to issue a notice of intention to withhold payment; instead there is now a requirement to pay the notified sum or give notice of intention to pay less.
In the original Construction Act, the Contractor had the right to suspend performance due to non-payment. Section 112 now extends the Contractor’s rights to include a right to recover the costs of suspending performance.
Changes to Adjudication Provisions
Section 108 (3A) requires that contracts must include provisions for the correction of slips by an Adjudicator. The wording used in the contract must deal with correction of typographical errors, clerical errors and ambiguity.
Section 108A is a new section that has been added to deal with allocating costs of an adjudication. A contract can no longer make any provisions restricting the power of the Adjudicator to allocate his fees and expenses unless an agreement is made after the giving of a notice of intention to refer. Therefore referring parties will now not be put off referring because of onerous clauses in contracts that make the cost of doing so their liability.
Section 111 (9) makes it a requirement that payment must be made within seven days of a decision by the Adjudicator.
