The Construction Act is the common name for Part II of the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009.
It gives parties to most construction contracts in England, Wales and Scotland minimum rights on payment, a right to refer disputes to Adjudication and a right to suspend work for non-payment. It is why payment timetables, payment notices and pay less notices exist.
What it requires
- The right to stage payments in contracts lasting 45 days or more.
- An adequate mechanism for working out what is due and when.
- A due date and a final date for payment.
- A Payment Notice, and a Pay Less Notice if the payer will pay less.
- The right to refer a dispute to adjudication at any time.
- The right to suspend performance after notice if a notified sum is not paid.
- No pay-when-paid clauses, except where the upstream party is insolvent.
Where a contract falls short, the Scheme for Construction Contracts supplies the missing terms.
Worked example
A Subcontract states a due date and a final date for payment 14 days later, but says nothing about notices. The Subcontractor applies for £30,000. The Main Contractor issues no payment notice and no pay less notice.
Because the main contractor missed both, the £30,000 in the application can become the notified sum, due by the final date. If it still holds back £4,000 for a delay claim, it has to pursue that as a separate claim, and the subcontractor can adjudicate for the unpaid balance.
The Act in day-to-day cost control
For a main contractor, the Act turns Valuation into a calendar of dates: application, due date, payment notice, pay less notice, final date for payment. Each subcontract may have its own timetable, so the dates need tracking per order, not per month. For a subcontractor, it supports interim applications and prompt payment, and the right to suspend after notice when a notified sum is unpaid.
The Act does not set Retention levels, and it does not stop a payer from making valid deductions. It controls how and when the deduction is notified.
Both points are set to change. The government has said it will legislate to ban retention in construction contracts and to limit payment terms to 60 days, through the Small Business Protections (Late Payments) Bill announced in May 2026. Neither is in force yet, and a ban on retention is not expected before 2027 (RICS, Retentions ban proposed).
Related terms
Payment Notice, Pay Less Notice, Interim Payment, Payment Application, Retention, Adjudication.
Planyard's JCT payment application workflow keeps each subcontract's application, valuation and payment dates together, so the Act's deadlines are easy to see.
