The DTI has this morning issued its second public consultation on proposed amendments to Part II of the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act) and the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the Scheme). This consultation sets out the specific proposals now being made by the DTI. The full text of the consultation document may be found on the DTI website. Responses are required by 17 September 2007.

It has been announced that any changes to be made following the consultation will be made by primary legislation rather than Legislative Reform Order. Although this decision is unsurprising, it raises questions over when parliamentary time will be made available to carry this through.

Noticeably, there is no proposal to make the Scheme mandatory and no prohibition on trustee stakeholder accounts for adjudication payments. There are significantly more changes proposed for the payment provisions - some of them quite fundamental - than for the adjudication provisions (which is as expected) but further work still seems to be required to achieve the clarity necessary for the proper operation of the payment notice provisions.

These are the specific proposals being made:

On adjudication

  • To extend the application of the Construction Act to oral and partly oral construction contracts
  • To outlaw provisions that make interim payment decisions conclusive (unless the parties agree to make such a payment conclusive after they have been notified of its amount)
  • To outlaw "Tolent clauses" i.e. ensuring costs of adjudication are fairly allocated

On payment

  • To allow an interim certificate (issued by someone other than the payer - e.g. the Architect or contract administrator) to act as a Section 110(2) payment notice
  • To provide that a payment notice and a withholding notice are in the same format and contain the same information - it appears that the proposal is that both must continue to be issued, but the withholding notice will become a "revision" of the payment notice (and in most cases be identical)
  • That both the payment notice and the withholding notice must set out what sums are being withheld due to non compliance with the contract requirements, abatement and/or set off
  • That in contracts without provision for certificates, and where the payer has not issued a payment notice, by operation of statute the "sum due" will be the amount in a payee’s claim (which can then be subject to a withholding notice)
  • To outlaw pay-when-certified clauses

On suspension rights

  • To entitle a suspending party to an extension of time for delay and reasonable loss and expense caused by the suspension
  • To provide that a suspending party need not suspend all of his obligations when exercising his right to suspend

On insolvency

  • In cases of payee insolvency, to entitle payers to withhold payment after the final date for payment where no effective withholding notice has been issued. This confirms the decision in Melville Dundas v George Wimpey, but limits its effect to insolvency situations.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 20/06/2007.