Of all the procedural deadlines a quantity surveyor has to track, two decide more payment disputes before they ever reach an adjudicator than any other: the payment notice and the pay less notice. Miss either one on the paying side, and the Housing Grants, Construction and Regeneration Act 1996 – substantially rewritten by the Local Democracy, Economic Development and Construction Act 2009 – stops caring what you actually think is owed. The sum applied for simply becomes the sum due. It’s one of the few corners of construction law where the clock matters more than the merits, which is exactly why it needs to be handled mechanically rather than just broadly right.
This guide works through what the Construction Act requires for payment notices and pay less notices, what happens when neither gets served on time, how JCT and NEC fold the Act’s default periods into their own payment clauses, where QSs most often come unstuck, and how Australia’s state-based security of payment legislation polices the same problem through a different mechanism.
The Act’s basic payment mechanism
Every construction contract caught by the Housing Grants, Construction and Regeneration Act 1996, as amended, runs on the same skeleton of dates, whatever the parties’ own contract calls them:
- Due date – when a sum becomes payable under the contract’s own payment mechanism (an application, a certificate, an assessment)
- Final date for payment – the contractual deadline for actually paying that sum, set as a period after the due date (17 days, by default, if the contract is silent)
- Payment notice deadline – no later than 5 days after the due date, by default
- Pay less notice deadline – the “prescribed period” before the final date for payment, set by the contract or, failing that, 7 days under the Scheme for Construction Contracts
- JCT fixes its own payment notice and pay less notice periods directly within the contract’s payment clauses rather than falling back on the Scheme, generally mirroring the Act’s default rhythm. Always check the specific form and any bespoke amendments – JCT’s periods are not automatically identical across every family of contract.
- NEC4 doesn’t use the term “pay less notice” at all. Compliance with the Construction Act is delivered through the secondary option clause Y(UK)2, which sets the final date for payment at 14 days after the due date (unless Contract Data states otherwise) and requires a party to notify the other before it can withhold anything from the sum otherwise due – the same underlying protection, in NEC’s own certification language rather than the Act’s.
- Treating the pay less notice as optional once a view has been formed. Even where the payer is plainly right on the valuation, failing to serve the notice on time hands the payee the notified sum regardless.
- Serving a pay less notice with no real basis of calculation. A notice that just states a lower number, without showing the workings, is vulnerable to being thrown out as invalid.
- Losing track of which notice is whose. The payment notice can come from either party depending on the contract; the pay less notice is always the payer’s. Mixing the two up at the drafting stage is a common and avoidable error.
- Assuming a late notice is better than none. It isn’t – a notice served even one day outside the prescribed period has no more effect than no notice at all.
- Not diarising the dates the moment a payment cycle opens. Every deadline in this process runs from the due date, so the date itself needs confirming immediately, not worked out retrospectively once a dispute has already started.
Get the due date wrong and every other date in the chain moves with it – which is exactly why clean date-tracking matters as much at interim valuation stage as it does when you’re finally preparing a final account.
Payment notices: the section 110A duty
Section 110A requires that, no later than five days after the payment due date, someone issues a payment notice stating the sum the giver considers due at that date and how it’s calculated. The contract decides who carries that duty – most standard forms put it on the payer or a certifier acting for them – but section 110A also lets the payee’s own application stand in as the payment notice where the contract says so, which is why so many interim applications are drafted explicitly to double as one.
If whoever is meant to give the notice doesn’t, section 110B lets the payee serve its own default payment notice instead. Crucially, the final date for payment then slides back by exactly the period the first notice was late – the payer doesn’t gain extra time to pay, it only loses the days it was already entitled to.
Pay less notices: the section 111 duty
A pay less notice is always the payer’s document, regardless of who issued the payment notice. If the payer intends to pay less than the notified sum – because of a valuation disagreement, a cross-claim, or a deduction such as liquidated damages – section 111 requires it to serve a pay less notice no later than the prescribed period before the final date for payment, setting out the sum it considers due and the basis of that calculation. Where the contract doesn’t fix its own period, the Scheme for Construction Contracts defaults to 7 days before the final date for payment.
The notice has to explain how the lower figure was reached, not simply assert that less is being paid. A pay less notice with no stated basis of calculation is not a valid notice at all, and courts have struck down notices on exactly that ground – vague references to “ongoing valuation issues” or an unexplained percentage cut won’t survive a challenge.
What happens when nobody serves a notice in time
This is the sharp edge of the whole mechanism. If the payer fails to issue either a valid payment notice or a valid pay less notice by the relevant deadline, the sum stated in the payee’s own application – acting as the default payment notice – becomes the “notified sum” and is payable in full by the final date for payment, regardless of whether that figure reflects the actual value of the work done. Payees who find themselves owed a notified sum like this typically enforce it through a rapid statutory adjudication commonly nicknamed a “smash and grab” claim, and adjudicators have consistently enforced notified sums strictly on whether a valid notice existed, not on the underlying valuation.
It isn’t quite the dead end for payers it first appears to be. The Court of Appeal’s decision in S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448 confirmed that a payer who has missed the notice deadlines can still bring a second adjudication to establish the true value of the works – but only after paying the notified sum first, not instead of it. Pay now, argue the real figure afterwards, and recover any overpayment through that second adjudication: that’s the sequence the courts have settled on, and it’s worth knowing before advising a client to simply withhold payment while a valuation dispute runs its course.
How JCT and NEC handle it in practice
The statutory scheme above is a backstop, not the only route – most projects run on the major standard forms, covered in more detail in our NEC vs JCT vs FIDIC comparison, and each applies the Act’s framework slightly differently.
Where QSs most often come unstuck
Australia’s equivalent: the payment schedule
Australia doesn’t have a single national Construction Act – security of payment is dealt with state by state – but the underlying idea, and the bite behind it, is the same. Under New South Wales’s Building and Construction Industry Security of Payment Act 1999, a respondent who receives a payment claim must respond with a payment schedule – the Australian equivalent of a pay less notice – within the time the contract allows, or within 10 business days of the claim being served, whichever is earlier. Under section 14(4), a respondent who misses that window becomes liable to pay the full amount claimed as a statutory debt.
Every other Australian state and territory runs its own version of security of payment legislation, and the response periods and mechanics differ from jurisdiction to jurisdiction – so the NSW figures above shouldn’t be assumed to apply on a project running under, say, the Queensland or Victorian Act. The practical lesson, though, is identical to the UK position: find out exactly which notice is due, on which date, under which Act or contract clause, before the clock starts running, not after.
What this means for you
Payment notices and pay less notices look like paperwork, but they function as a strict limitation regime hiding inside the payment mechanism of every construction contract. The QSs who never get caught out by them are the ones who treat every due date as the start of a countdown rather than a line in a spreadsheet – diarising the notice deadlines the moment a valuation is submitted, drafting any pay less notice with a genuine basis of calculation rather than a bare figure, and never assuming that being right on the value of the work is a substitute for being on time with the notice that says so.