A quarter of contractors wait over 60 days for payment from clients. Here are the legal routes to prompter payments
Results from a survey conducted by the National Specialist Contractors Council prove what the majority already know; a quarter of contractors wait more than 60 days to receive payment on a job.
Maybe not quite on a par with ’In this world nothing can be said to be certain, except death and taxes’ in terms of stating the obvious, but still pretty far up there it would seem.
The nub of the issue here is what a contractor can do to squeeze payment out of the blighters. A face-to-face discussion with the client is the grown-up option; you’d be surprised just how effective a short sharp reminder of your legal rights will be in jolting your client into sharpening up their payment procedures.
If this fails, legal options should come under consideration. Reviewing the terms of an agreement with the client should throw up provisions that detail a contractor’s remedies if payment is late.
Look out for clauses that detail the interest a contractor can charge on late payments to pass under the client’s nose; the Late Payment of Commercial Debts (Interest) Act 1998 states this rate has to be more than a standard commercial rate of interest.
If late payment of invoices starts to become more of a habit than you’d like or turns into the non-payment of invoices altogether, a more aggressive approach may be required.
While calling in the heavies can work for some, I have in mind provisions of the Construction Act 1996 which allow parties to issue adjudication proceedings demanding payment of the sums due.
Adjudication is likely to lead to a swifter resolution of a dispute than issuing court proceedings so your bank balance could be considerably healthier in no time.
Another tool available to contractors under this Act is the right to suspend performance of the works in the event of late payment. While taking such a step is certainly not for the faint hearted, especially considering the current misery enshrouding the industry’s performance, it may be the case that the mere threat of suspension is enough to bring the client into line
Andrew Milne is a solicitor in the professional risk and construction team at law firm Weightmans LLP.