How Long Before a Contractor Has To Pay a Subcontractor for Their Work? A counter-claim is not a direct way to withhold money, but the threat of legal proceedings can be used indirectly as a bargaining tool. A contractor without the right of set-off may make a counter-claim for compensation.The money owed by the subcontractor is usually in accordance with the terms of the agreement but can be under another contract between the same parties which is not connected with the current project. This is when the contractor deducts sums owed to him by the subcontractor and can mean that it effectively cancels out the subcontractor’s payment in whole or in part. There may also be a clause that allows for a reduction in amounts owed under these circumstances. Contracts often make inspection provisions and may contain a clause that the subcontractor must remedy defective or incomplete work before payment is made. If work has not been finished or not completed to an acceptable standard in line with the subcontractor agreement.There are numerous situations where it is perfectly legal for a contractor to withhold payment from a subcontractor.Ĭlarity should be sought from the original contract, but, in general terms, there are three situations where a contractor can refuse to pay a subcontractor: When Is It Legal For Contractors To Withhold Payment From Subcontractors? Many subcontractors do not take time to adequately familiarise themselves with the subcontractor agreement before signing on the dotted line - and literally sign away their rights. However, even if a contractor has not complied appropriately with issuing a ‘pay less’ notice, they may still be able to avoid payment based upon the terms and conditions of the original agreement. If the contractor fails to comply with the requirements of the Construction Act, it’s much easier for a subcontractor to challenge the refusal to pay. The basis of all calculations must be clear, and the work performed to date must be valued and stated in the notice. The ‘pay less’ notice must be produced within a specified time frame and set out detailed reasons for why the monies are being withheld. In practice, it’s rarely that straightforward.įor a contractor to refuse payment to a subcontractor lawfully, they must issue the subcontractor with appropriate notice in writing.įor construction contracts entered into after October 2011, the Construction Act stipulates that subcontractors must be issued with a pay less notice. In theory, a subcontractor can pursue the contractor for withholding payment through the courts. ![]() What Are Subcontractor’s Rights When a Contractor Refuses To Pay? This guide clarifies subcontractor payment entitlements and what to do when monies owed are withheld. Often, subcontractors don’t know their legal entitlements and are not proactive in enforcing their rights to payment. Neither scenario is welcome, but unfair payment practices are rife in the UK construction industry. If the subcontractor stops work entirely, this can jeopardise the entire construction project. The subcontractor may experience cash flow problems that may be severe enough to threaten their business. ![]() ![]() ![]() When a contractor doesn’t pay a subcontractor, all sorts of consequences can flow from non-payment. Construction contracts are always notorious for their complexity - not least because there are often multiple parties in the contractor chain: Electricians, bricklayers, plumbers, engineers, and carpenters, all dependent upon one another.
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