THIS month, amendments were made to the Housing Grants, Construction and Regeneration Act 1996 and the Scheme for Construction Contracts (England and Wales) Regulations 1998.
The act and scheme have remained untouched for the last 12 years, so these changes are rather significant.
Among other things, the amendments have created new payment provisions which must be incorporated into a construction contract. If not then all payment provisions within that contract will be removed wholesale and replaced with statutory provisions of the new scheme.
Where historically a contractor’s payment application meant relatively little in respect of creating a liability to pay, this has now changed.
Likewise, where an unforthcoming payment notice meant relatively little, this too has changed.
It is encouraging that these amendments have come along at a time where cashflow is ever more crucial as lifeblood to the industry. If applied correctly, the new provisions will undoubtedly assist many construction firms.
It is clear that the parliamentary legislators have been listening to the construction industry about levelling the payment playing field.
This will ensure that, if a contractor (or architect, engineer, quantity surveyor, subcontractor, sub-subcontractor or self-employed tradesman) asks for some money, the paying party is now unequivocally obliged to pay up, or say “no…but here are my reasons for not doing so”.
JCT and NEC3 have already published their amendments and other publishers of standard form contracts will follow.
It is, therefore, important to ensure that bespoke construction contracts are drafted correctly and in compliance with the amended Construction Act in order to guarantee that unintended consequences do not occur if the contractual conditions are later challenged.
The new payment provisions create effective time bar provisions which may result in rough justice within the interim if the provisions within the Construction Act are not met with compliance.
Client advisors and agents must beware that compliance failures may result in losses being sustained by their clients and resultant professional negligence claims being brought against them.
It is vital that those in the construction industry seek the necessary advice if they are not clear about what the amendments to the Construction Act will mean, otherwise they could get caught out.
For more information on Constructing Excellence in the North East, please contact chief executive, Catriona Lingwood, on 0191-3740233 or catriona@cene.org.uk
Pete Tighe, partner at the Geneva Group.