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Interim Payment Process Explained

The document discusses interim payments for construction projects under UK law. It explains that interim payments are required by law if a construction project lasts longer than 45 days. It then outlines the standard interim payment process using a 21 day payment cycle under an NEC contract. This includes the contractor submitting a payment application 7 days before the due date, the employer assessing it over the next 7 days and issuing a payment certificate within 5 days of the due date, with payment due 14 days later. It notes that the contractor can suspend work if payment is not made on time.

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Semaj Eel
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348 views2 pages

Interim Payment Process Explained

The document discusses interim payments for construction projects under UK law. It explains that interim payments are required by law if a construction project lasts longer than 45 days. It then outlines the standard interim payment process using a 21 day payment cycle under an NEC contract. This includes the contractor submitting a payment application 7 days before the due date, the employer assessing it over the next 7 days and issuing a payment certificate within 5 days of the due date, with payment due 14 days later. It notes that the contractor can suspend work if payment is not made on time.

Uploaded by

Semaj Eel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
  • Interim Payment Process Explained

Construction Interim Payment Process Explained

Interim payments are vital for construction projects which span over a long duration, as it
enables on-going financing for the contractor. However, interim payments are not just a
convenience for the contractor, it’s also a requirement under UK law. In this video we’re going
to look at what the law says and what process needs to be followed.

So when are interim payments actually required? Let’s look at what The Housing Grants,
Construction and Regeneration (HGCR) Act 1996 states:

“A party to a construction contract is entitled to payment by instalments, stage payments or


other periodic payments for any work under the contract unless—

(a)it is specified in the contract that the duration of the work is to be less than 45 days, or

(b)it is agreed between the parties that the duration of the work is estimated to be less than
45 days.”

Basically, if the work is longer than 45 days, then interim payments will need to be made

It’s important that employers are aware of this law as it provides the basis for interim
payments throughout a project

In this video we’re going to explain the interim payment process using an NEC contract. Some
of the durations in this example may be slightly different for the contract you’re using.
However, for the purpose of this video we will use the standard NEC 21 day payment cycle.

Under this payment cycle, the contractor submits their application for payment on the
assessment date or 7 calendar days before the due date. Over the next 7 calendar days, the
employer will then carry out their assessment of the contractors application taking us to the
due date. From the due date the employer will have 5 days (as stated in the HGCR act) to
submit their interim payment certificate to the contractor. The interim payment certificate
will contain the notified sum and the final date for payment.

The final date for payment falls 14 calendar days after the due date, and if the employer
intends to pay less, they must issue a payless notice no later than 7 days before the final date
for payment. The final date for payment is the final date the employer can pay the contractor
before the contractor can suspend performance of the contract under section 112 of the
HGCR act.

It should be noted If the employer fails to provide an interim payment certificate within 5
days of the due date, the contractor’s application for payment becomes something known as
a “default payment notice” under the HGCR Act. This means that unless the employer then
submits a payless notice, they’ll be required to pay the notified sum under the default
payment notice.

The 21 day payment calendar can be split into 2 sections: the assessment period, which covers
the first 7 days, and the prescribed period, which covers the following 14 days. These periods
are fixed by the contract and can be changed subject to agreement by the parties.

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