The proposed changes to the Housing Grants Construction and Regeneration Act 1996 – where are we up to?

Published: 5th June 2009

During its passage through the committee stages and legislature, the proposed amendments were substantially reduced. What is left, subject to further review in the Commons, is summarised below.

Adjudication

Construction contracts need no longer be wholly in writing or evidenced in writing. Contracts which are made orally in whole or in part will be subject to the Act. This will result in a need for detailed evidence as to the existence and terms of the contract.
The adjudicators will have power to correct clerical or typographical errors in their decisions. The English courts had already decided that such power exists and the original proposal was to introduce the new power in Scotland only. Now it will apply both sides of the border. The extent of the new power is uncertain and is sure to be tested in the courts.
Provisions dealing with the allocation of adjudication costs (the parties' costs or adjudicator's fees) will be unenforceable unless entered into after the adjudicator's appointment.

Payment

'Pay when certified' and other types of clause making payment dependent on the performance of obligations under other contracts, or upon the giving of notice by the paying party, are outlawed.
Section 110(2) (notice of the amount proposed to be paid) is to go. The new subsection says the contract must provide for the giving of notice (payment notice) by the payee detailing the sum considered to be due and the basis on which it is calculated. It will be for the parties to decide and agree who will have the obligation. If it is the payer, and he fails to give notice, the payee may do so.

Withholding

Section 111 is to be replaced. The payer will have to pay the sum stated in the payment notice unless he gives a notice of intention to withhold payment. This notice will be needed whatever the reason for the withholding e.g. re-measurement, reduction in quantities, work not done at all, correction of previous error, abatement or set-off. This aims to avoid the un-certainty as to whether or not a notice is required.
A new subsection will allow withholding without notice if insolvency occurs after the time for service of notice is passed if the contract so provides.

Whilst the amendments seek to reduce the "grey areas" that surround the Act, they are likely to raise as many questions as they answer. Once the new Bill receives its final reading, it will be necessary to review contract terms to ensure compliance and for the redrafting to begin.

If you would like to discuss any of the issues raised in this update please contact Charles Tomlinson or Ken Salmon in our Construction and Dispute Resolution department on 0161 214 0500.

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