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Is a ‘Pay When Certified’ clause enforceable?

Background: We have a number of clients who work in the construction sector who seek our assistance to obtain retention monies from main contractors. This often relates to a ‘Pay When Certified’ clause, which is becoming increasingly common in construction contracts. Essentially, main contractors are seeking to delay/withhold payment of retention monies to sub-contractors until the employer has issued a final certificate and thus final payment under the main contract. This of course, is completely outside of the sub-contractors control and often results in payment being delayed or withheld despite the sub-contractors works being completed and the rectification period for the sub-contract works having passed. This is having an adverse effect on the sub-contractors cash flow and is often resulting in sub-contractors agreeing to a smaller sum in full and final settlement of outstanding sums they are owed to assist their liquidity.

The legal change: It has long been acknowledged in the construction industry that sub-contractors need to be protected and placed on an equal platform to main contractors which resulted in the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”). The Construction Act has now been amended to offer further protection to sub-contractors pursuant to s142 of the Local Democracy, Economic Development and Construction Act 2009. This change essentially prohibits (main) contractors from including a pay when certified clause in their contract which will result in fewer delays for sub-contractors receiving monies. If a contract includes such a clause, the clause will be unenforceable and the sub-contractor can take appropriate action to pursue sums due from the (main) contractor if the (main) contractor is withholding sums on this basis. As a result of this change, it is likely that (main) contractors will amend the payment provisions in their contracts to include an extended payment periods for the sub-contractor being paid; which is permitted pursuant to the Construction Act. It is important in the interim however that (main) contractors are not seeking to evade making payment to sub-contractors that are due and payable.

Conclusion: Else Solicitors can advise you in respect of any construction dispute you may have. Whether this be for unenforceable contract clauses, payment of retentions sums that are due or a final account disputes. Please do not hesitate to contact one of our construction specialists who would be happy to provide you with initial advice over the telephone.

Why Else?

Else is a modern, dynamic and forward thinking solicitors who have the expertise you expect from a large, traditional law firm. We are very experienced in the construction sector and have acted for both main and sub-contractors.

Else Solicitors has an enviable reputation for always going the extra mile and offering a personal, jargon-free service. You are in trusted hands and will benefit from our extensive legal knowledge and experience.

For more information on any construction issue then please contact Amiee O'Toole, Dispute Resolution Solicitor at Else Solicitors on 01283 526221 or amiee.otoole@elselaw.co.uk