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The “pay less notice” – a useful tool for developers

Most of us never need to concern ourselves with what a “pay less notice” is, let alone how it might impact upon us. However, for anyone engaged in a development project, the pay less notice becomes extremely important. Lodders’ partner and Real Estate law specialist Alastair Frew summarises a recent case in which a pay less notice could have saved time and money for a dissatisfied developer.

What is a “pay less notice”?

A “pay less notice” is a mechanism imposed by the Housing Grants, Construction and Regeneration Act 1996, to introduce certainty for contractors and subcontractors relying on payments coming down from the employer/developer. If the developer disputes the invoice from the contractor/consultant, then a pay less notice must be served, setting out what sum the developer is prepared to pay. The reduced sum must then be paid, pending resolution of the dispute regarding the outstanding sum.

Adam Architecture Ltd v Halsbury Homes Ltd

In the recent case of Adam v Halsbury, the architect submitted its invoice at a time when it was in dispute with the developer over precisely what services were included in its appointment. The developer failed to pay the architect’s invoice, but crucially it also failed to serve a pay less notice. After an adjudication, claim and appeal, the Court held that the developer was liable to pay the architect’s invoice in its entirety, regardless of any argument about the scope of the architect’s services; the failure to serve a pay less notice left the developer entirely liable to settle the invoice.

This case serves as a reminder to developers that, if there is any dispute regarding a construction contract invoice, it is critical that a pay less notice is served.

For more information on this story or about Lodders’ Real Estate services, contact Alastair Frew on 01789 206117 or by email.

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Get in touch

For more information on this story or about Lodders’ Real Estate services, contact Alastair Frew on 01789 206117 or by email.