KubitDocs
Find my documents

KubitDocs · Guides

What is a pay less notice?

A pay less notice is the written notice a payer gives when they intend to pay less than the sum notified as due under a construction contract. Without one, section 111 of the Housing Grants, Construction and Regeneration Act 1996, as amended, says the notified sum must be paid by the final date for payment. There is a narrow insolvency exception in section 111(10). Apart from that, the notice is the only route the Act gives for paying less.

The notified sum comes first

Section 110A requires every construction contract to provide for a payment notice for each payment. Either the payer (or a person the contract names) gives it, or the payee does, no later than five days after the payment due date. The notice states the sum its author considers due at the payment due date and the basis on which it is calculated. The sum can be zero.

If the payer was meant to give the notice and did not, section 110B lets the payee give its own. The final date for payment is then postponed (pushed later) by the number of days that notice was late. Where the contract lets the payee state in advance what it considers will become due, and the payee does, section 110B(4) treats that as the payee's notice.

Whichever notice applies, its figure is the "notified sum". Section 111(1) says the payer must pay it, to the extent not already paid, on or before the final date for payment.

Who serves it and what it must say

Section 111(3) lets the payer, or a person the contract names, give the payee notice of an intention to pay less than the notified sum. Section 111(4) says it must state:

  1. The sum the payer considers to be due on the date the notice is served.
  2. The basis on which that sum is calculated.

Once a valid notice is given, the payer's obligation is to pay the sum in that notice. A bare figure does not show a basis. Set out each deduction with its amount: the defective work, the measured shortfall, the contra-charge.

The timing

Section 111(5)(a) says the notice must be given "not later than the prescribed period before the final date for payment". Under section 111(7), that period is whatever the parties agreed, and only if they agreed nothing does the Scheme for Construction Contracts fill the gap.

In England and Wales, paragraph 10 of Part II of the Scheme sets the fallback at "not later than seven days before the final date for payment". Where the contract has no final date, paragraph 8 puts it at 17 days from the date the payment becomes due.

So where the Scheme's dates apply, a payment due on day 0 has a final date of day 17, and the pay less notice must be given by day 10. When counting periods under this Part of the Act, section 116 leaves out Christmas Day, Good Friday and bank holidays.

Read your contract first: its own periods govern.

Section 111(5)(b) adds one more rule. Where the notified sum comes from the payee's notice, the pay less notice may not be given before that notice. A pay less notice sent ahead of the application does not count.

What happens without one

The payer must pay the notified sum by the final date. The only exception is section 111(10): where the contract says the payer need not pay if the payee becomes insolvent, and the payee became insolvent after the prescribed period.

If an adjudicator decides more was due

Section 111(8) and (9) cover two cases:

  • a payment notice was given with no pay less notice, and an adjudicator decides more should be paid than the notice stated, or
  • a pay less notice was given, and an adjudicator decides more should be paid than that notice stated.

In both, the extra is payable no later than seven days from the decision, or the date that would otherwise have been the final date for payment, whichever is later.

Contracts it does not apply to

Section 106 says Part II of the Act does not apply to a construction contract with a residential occupier. That means a contract principally for work on a house or flat that one of the parties lives in or intends to live in. An extension to the house the homeowner lives in, or will live in, is outside these rules; the same work for a landlord is not. The subcontract between the builder and their trades is a separate contract, and on section 106's wording neither party to it lives in the house.

Part II also does not cover:

  • a contract only to make or deliver materials, components, plant or machinery, without installing them (section 105(2));
  • work outside England, Wales and Scotland (section 104(6)(b)).

Some other contracts are excluded by statutory order, including one made for Wales in 2023.

Common questions

Is a payment notice the same as a pay less notice? No. The payment notice states what is due at the due date. The pay less notice comes later and is the way to pay less than that.

Can a payment notice say nil? Yes, section 110A(4) allows zero. It still has to show the basis.

I am a subcontractor. Does this concern me? Both ways: your contractor serves them on you, and you serve them on your own subcontractors.

The contract says nothing about payment notices. Section 110A(5) says the relevant provisions of the Scheme apply.

What a template does not do

The notice gives you the fields section 111(4) asks for, the dates to check and space for the calculation. It does not know your contract's periods or whether the deductions are justified. That judgement stays with the person signing it. What our documents can and cannot promise.

Documents for this work