A subcontractor sends you an application for payment. It is higher than you think the work was worth. Your quantity surveyor — the person whose job is to measure and value the work on site — clocks it, means to go through it line by line, and gets pulled onto a problem on another job. Three weeks later a letter arrives. It is from an adjudicator, and it says you now owe the subcontractor the full amount they asked for. Not the amount the work was worth. The full amount.
You didn’t lose that money because the work wasn’t worth it. You lost it on a date.
The law that quietly runs your cash flow
Almost every building contract in the UK sits under the same piece of law. It is the Housing Grants, Construction and Regeneration Act 1996 — everyone just calls it the Construction Act — tightened up by a second act in 2009 that took effect in October 2011. You did not sign up to it as such. It is written into your contracts whether anyone mentions it or not. And the part that catches firms out is the bit about how money is meant to change hands.
It works like this. On a job paid in stages, each payment has a due date, which is the day the amount owed is fixed, and a final date for payment, which is simply the deadline by which the money actually has to be in the other party’s account. Between those two dates, the paying party is meant to do a little paperwork.
First comes a payment notice. Within five days of the due date, the paying party has to send a short notice saying how much it reckons is owed and how it reached that figure. Then, if it later wants to hand over less than that — because the work wasn’t all done, or the bill was padded — it has to send a second notice, called a pay less notice, before the final date for payment. Where the contract doesn’t spell out how far before, the fallback rules give you seven days.
Here is the sting. Send neither notice, and the law settles the argument for you. The figure the other side asked for becomes what the Act calls the notified sum, and you have to pay it — in full, on the final date, whether or not it was fair.
Smash and grab
There is even a nickname for it. When a contractor reckons it has been underpaid — or a subcontractor notices you forgot your paperwork — it can go to adjudication. That is a fast dispute process, also baked into the Act, where an independent adjudicator has to reach a decision within twenty-eight days. The whole thing is built on “pay now, argue later”: it exists to keep cash moving so firms further down the chain don’t go under waiting to be paid.
A claim that says nothing more than “they applied, you sent no valid notice, so you owe the lot” has a name on site: a smash and grab. The adjudicator doesn’t weigh up whether the work was worth the money. They check whether the notices went out on time. If they didn’t, you pay. You can try to claw the difference back afterwards through a slower, separate argument about what the work was really worth — but by then the money has gone, and getting it back is a fresh fight you might lose.
And it runs both ways. The same rules that punish you for forgetting to notice a subcontractor will rescue you when a client forgets to notice you. The firms that come out ahead here aren’t the ones with the best lawyers. They’re the ones who never miss a date.
A date problem is a software problem
The instinct is to fix this with discipline. Tell the surveyor to diary the deadlines.
I don’t trust that fix, for the same reason I don’t trust it anywhere else. The dates are different on every job. Each contract sets its own due date and its own final date for payment, so the five-day window and the pay less deadline land on different days for every subcontractor, on every valuation, every month. Asking a busy person to hold a shifting grid of dates in their head, across a dozen live jobs, and never drop one, is asking to be let down. Not because anyone is careless. Because it is genuinely hard.
What works is something that simply knows. Enter each contract’s payment dates once, and a small tool can do the counting for you: this subcontractor’s pay less notice is due Thursday; this client owed you a payment notice and never sent one, so your application can now stand as the sum due. It isn’t clever. It is a calendar that understands one specific piece of law and speaks up before a deadline instead of after it.
Notice what that is, and what it isn’t. It is not a payment platform with a procurement suite and a document library bolted to the side. It is one small thing that watches the handful of dates you cannot afford to miss. That is the only kind of software I think most firms should pay for: narrow, fitted to where the law actually bites, and quiet until the moment it matters.
One missed pay less notice on a padded six-figure application is not a rounding error. It is the number that turns a decent job into a loss, for no better reason than a fortnight got busy.
Where this doesn’t apply
If you mostly do small, fixed-price work for homeowners — a kitchen, a single extension — the picture is different, and some of these rules don’t bite the same way on contracts with a private householder. A clear quote and an honest invoice will serve you better than any system.
And if you already run a tight valuation process — notices going out on time, every job, with one person who owns the dates and never misses — then you need nothing from me. Boring and reliable is the entire point. Don’t let anyone sell you software to replace a habit that already works.
But if reading this made you wonder whether last month’s notices actually went out, that wondering is the problem. The deadline doesn’t care that you were busy. It has either passed or it hasn’t.
If you’d like a clear-eyed look at where your firm is exposed, that is the sort of thing I check when I run an audit. Get in touch.