This Act deals with payments due under construction contracts. Find out what your rights and responsibilities are and how to use the adjudication process under the Act if you have a dispute about payments.
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The Construction Contracts Act 2002 came into force on 1 April 2003. The purpose of the Act is to provide a process for deciding what payments have to be made under a construction contract and when they are due. When you enter into a contract with a builder to build your house, you have to comply with some sections of the Act.
The Act also provides quick and simple procedures to resolve disputes about money due under construction contracts.
The definition of construction work in the Act is wide-ranging and covers most of the work which might be done in building, altering or maintaining a house such as:
The Act says when you enter into a contract with a builder (or other type of contractor), you can negotiate a payment schedule with them to cover:
You can’t have a clause in your contract that says you won’t pay the builder until you get paid by someone else – this is known as a ‘pay if paid’ clause and it has no legal effect.
If you are building the house for someone else to live in, say as a ‘spec’ house or a rental, this would be a commercial construction contract (which means “a contract for carrying out construction work in which none of the parties is a residential occupier of the premises that are the subject of the contract” in section 5 of the Act).
The default payment provisions in the Act, which apply if you don’t have a payment schedule in your contract with the builder (or contractor), are:
If you don’t agree with the amount being claimed by the builder/contractor, you can give them a written payment schedule stating the amount you think you should pay. You’ll need to say exactly:
If you do provide a written payment schedule, but don’t pay the amount you’ve proposed on the date due, they can recover your proposed amount, along with costs, in Court.
The builder/contractor can only suspend work if this is agreed in the contract, or if it’s a commercial construction contract, i.e. if you have built the house with the intent of selling it or renting it.
If you don’t pay because you are disputing the scheduled amount, you can use the adjudication procedure introduced by the Act.
The Act provides a fast-track adjudication process for disputes. The only disputes that can be referred to adjudication are those which relate to payments under the contract and any disputes you have about the rights and obligations of the parties under the contract.
The adjudicator can make a decision within a very tight timeframe and the decision is binding on both you and the contractor. It is also enforceable as a Court judgment giving access to the normal range of enforcement procedures. The contractor can also ask the adjudicator for a charging order over the building site.
Nothing in the Act, however, prevents both parties from first submitting a dispute to another form of resolution, such as the Courts, arbitration or mediation.
Whoever starts the adjudication process must serve a written notice of adjudication on the other person giving details about the dispute and the names and addresses of both parties for service of the legal documents. If it is the builder starting off the adjudication, (and the building is not a commercial property), the builder’s notice must also:
If the builder’s notice doesn’t do this, the notice will have no legal effect. This additional information for home-owners must be in the form set out in the Schedule 1, Form 2 of the Construction Contracts Regulations 2003 available on the Government Legislation website.
The steps in the adjudication process are:
A house built before it is sold. The builder speculates that it will sell for a profit.
An order of the Court placing a charge over property, up to an amount owed by the property owner. For example, a contractor may be able to obtain a charging order against the title to the site on which work is being carried out, if the owner fails to pay amounts owed.
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