Changes to the Construction Act
As most people will know, on 1 October 2011 the Local Democracy, Economic Development and Construction Act 2009 (“LDEDCA”) came into force in England and Wales. LDEDCA amends the adjudication and payment provisions of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”). The amendments also led to the drafting of a new Scheme which also came into force on 1 October 2011.
Naturally this year’s Annual Review includes a number of articles that relate to issues arising out of the changes, including articles on the following pages about the adjudication changes and some key contractual issues and then right at the end on pages 51-52 a copy of September’s issue of Insight, our new newsletter which summarises the key changes relating to the payment provisions. The changes to the legislation themselves may not seem extensive on paper but the changes they introduce, especially in relation to the payment provisions, are wide-ranging.
The three main changes are:
(i) a new payment regime including the introduction of a new default notice, and the current withholding notice is replaced with a pay less notice;
(ii) an enhanced right of suspension; and
(iii) limited changes to the statutory adjudication process.
Do not forget: the changes are not retrospective
However, first of all, we begin with an important proviso. Remember that, despite all the attention given, and rightly so, to the changes, the amendments introduced by the LDEDCA only relate to contracts entered into on or after 1 October 2011. This means that we are in a transitional period and it is important to remember that the new regime is not retrospective and will not apply to your existing contracts. This means the two systems for adjudication and payment will co-exist side by side. The existing regime will continue to apply until all contracts entered into before 1 October 2011 have been completed - this could be a period of many many years.
Further, parties may well find that they end up on some projects where both the new and old schemes will apply. For example, if you have entered into a main contract before 1 October 2011, you may well find that there are a number of subcontract packages that were not let until after 1 October 2011. It is not the date that the project started that matters, it is the date of the individual (sub)contract.
So you could find yourself having to operate two sets of payment regimes with, as our Review explains, different notice requirements and different timescales. It is therefore more important than ever to remember to adhere to the payment and notice timetable that applies to the particular (sub)contract in question. Therefore, if you have not already done so, you should amend any standard or template construction documents to comply with the new provisions.
This means that the need for careful monitoring of incoming post, faxes and emails at all project sites and at each regional office and head office will continue to be essential, as will careful and detailed diary entries on receipt of applications for payment or certificates or valuations from architects or contract administrators on each project in respect of the dates upon which all notices and payments are required by the contract (or the Scheme) to be made.
Remember, too, that it is quite possible that given the changes in the requirements for contracts in writing, whilst you cannot adjudicate under the main contract you will find that your subcontractor is perfectly free to adjudicate at any time.