The Construction Payment Cycle, get it wrong and you'll be in trouble...

But don't worry, I've got you covered by My Experiance,,

Whether you’re a Quantity Surveyor, main contractor, subcontractor or project client having a full understanding the payment cycle is essential

The Housing Grants, Construction and Regeneration Act 1996 (aka the "Construction Act") sets out how payments should be made throughout construction projects

Here’s a step by step breakdown that I've done of the payment cycle along with a few hints and tips which you might find helpful:

1) Application for Payment - Day 0

What it is = The contractor or subbie submits a clear breakdown of work done and the amount due

Handy Hints = While the Act doesn’t require this, most contracts do and clear, well supported applications speed up reviews and reduce disputes. A clear and accurate application can also become the Notified Sum if the payer fails to issue a Payment Notice meaning a strong application isn’t just good practice, it’s legal protection!

2) Payment Notice - Within 5 days of Due Date

What it is = The payer (client or main contractor) must confirm how much they’ll pay and how they calculated it

Handy Hints = If no notice is issued the application becomes the legally payable sum unless a valid Pay Less Notice is served later, so don't forget to send it! This is a statutory obligation, and failing to issue it can seriously weaken the payer’s position in any dispute or adjudication.

3) Due Date - Typically Day 14

What it is = The date when payment is legally due

Handy Hints = Contracts should clearly set this but if they don’t the Act steps in with the implied terms being the fallback. If the contract doesnt say anything about it the implied terms require a "reasonable" period for payment (typically 30 days in practice).

4) Pay Less Notice - At least 7 days before Final Payment

What it is = If the payer wants to reduce the sum that they are going to pay they must serve a Pay Less Notice explaining why and how much will be deducted from the application sum.

Handy Hints = Late or vague notices are legally invalid even if the deduction is justified. A Pay Less Notice must clearly break down the deductions and explain why they are being made a one liner saying "we are paying less" is not enough and will fail in adjudication.

5) Final Payment Date - Typically Day 28 to 30

What it is = The full amount (or adjusted amount if a valid Pay Less Notice was served) must be paid

Handy Hint = A "reasonable period" (usually 30 days) applies if the contract is silent. If no Payment or Pay Less Notice has been served, the full amount applied for is legally payable the Act is designed to protect cash flow and prevent unfair withholding of money.

I hope this summary has shone some light onto the different stages of the typical construction payment cycle!

Let me know if I've missed anything!