Pay less notices: what they must say

Section 111 of the Housing Grants, Construction and Regeneration Act 1996, as amended, does something blunt. It says the payer must pay the notified sum on or before the final date for payment. The only escape is a pay less notice, served before a deadline the contract sets.

That is the whole mechanism. Its harshness is deliberate. Parliament decided that arguments about value should not be a reason to sit on money, so it separated the two questions: what must be paid now, and what the work is actually worth. A pay less notice is how the payer answers the first question. It is not a negotiating position.

What the notice must contain

Two things, and they are not optional:

• The sum the payer considers due at the date the notice is served
• The basis on which that sum is calculated

The second is where notices fail. "We consider £42,000 to be due" is a number without a basis. It tells the payee nothing about what has been deducted or why, and it gives an adjudicator nothing to test.

The basis does not need to be long. It needs to be intelligible. A short schedule showing the sum applied for, each deduction, the reason for it and the resulting figure will normally do what a page of prose will not.

When it must arrive

The notice must be given not later than the prescribed period before the final date for payment. That period comes from your contract:

Note the direction of travel. The deadline is counted backwards from the final date for payment, not forwards from the application. Surveyors who diary the application date and add a fixed number of days will eventually get this wrong on a job where the due date falls awkwardly.

The four ways the right is lost

1. It is late

A day late is late. There is no substantial compliance argument, no discretion, and no rescue in the fact that the deduction was obviously justified. The notified sum becomes payable.

2. It states no basis

A bare figure is vulnerable. If the notice does not explain how the sum was arrived at, the payee can argue it is not a valid notice at all, and that argument frequently succeeds.

3. It goes to the wrong place

Contracts specify who serves notices and how. An email to a site manager, when the contract requires service on the contractor at its registered office, is not automatically good service. Check the notices clause before you rely on the way you have always done it.

4. Nobody realised a sum had been notified

This is the subtle one. If the payer fails to serve a payment notice, the payee's application can itself become the notified sum. The payer then has a deadline it does not know it is running, because it never engaged with the application in the first place.

Paying first and arguing afterwards

Missing the notice is expensive but it is not the end of the argument. Following S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448, a payer who has failed to serve notices must pay the notified sum, but may then start a separate adjudication to determine the true value of the work.

The order matters. Pay first, then argue. A payer who tries to run the true value argument as a reason not to pay is usually told to pay anyway, having spent money on an adjudication to get there.

So the practical consequence of a missed notice is rarely a permanent loss. It is a cash flow event, a second set of fees, and a conversation with a client about why it happened. None of which improves anyone's month.

A short discipline that removes the problem

• Record the due date and final date for payment when the project is set up, not when the first application arrives
• Derive the pay less deadline from the final date, counting backwards
• Diary it as a hard date, separate from the valuation date
• Draft the basis of calculation at the same time as the valuation, while the reasoning is fresh
• Keep proof of service, not just a copy of the notice

Every one of these is administrative. None of them requires judgement. That is precisely why they are worth taking out of a surveyor's head and putting somewhere that does not have a busy week.