The smash and grab lives on: why payment notice deadlines matter in construction

Thirty years on from the introduction of the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”), many of the issues giving rise to payment disputes remain strikingly familiar.

Recent case law has highlighted two recurring causes of payment disputes which we have written about over the past few weeks: defects in the payment machinery itself, and failures to comply with the requirements for valid payment notices. In this concluding article, we turn to another common source of dispute: timing.

Many payment disputes follow a familiar pattern. One party focuses on the valuation, the merits of the claim or the wording of a notice. The other points to a missed deadline. The resulting dispute often has less to do with the value of the works than the operation of the statutory timetable itself.

Recent authorities demonstrate that, despite three decades of case law, the courts remain reluctant to excuse failures to comply with payment deadlines. A notice may be perfectly drafted and a payment claim entirely justified. Neither will matter if the notice arrives too late.

Put another way, a payment notice served one day late is usually just too late.

Recent decisions, including Liberty Roofing (East Midlands) Ltd v Midleton Developments (Church Street) Ltd, provide a useful reminder of how strictly the courts continue to approach notice deadlines. 

Why timing still matters

The Construction Act's payment regime is designed to provide certainty and maintain cash flow. Whether a party becomes entitled to a notified sum often depends upon a series of events occurring within prescribed periods.

Those events commonly include:
•    an application for payment;
•    a payment notice;
•    a pay less notice; and
•    payment by the final date for payment.

The validity of each stage depends not only upon the content of the relevant document but also upon when it is served.

That point is sometimes overlooked. Parties frequently devote considerable attention to the substantive valuation, whilst assuming the payment machinery has been operated correctly. The cases continue to demonstrate that the opposite can be true. A strong valuation may fail because of a procedural defect. Equally, a correctly prepared notice may be ineffective because it was served too late.

As the previous articles in this series demonstrated, disputes may arise because the payment machinery itself is defective or because a notice fails to comply with contractual requirements. However, even where both of those hurdles have been overcome, compliance with the statutory timetable remains essential.

What happened in Liberty Roofing?

In Liberty Roofing (East Midlands) Ltd v Midleton Developments (Church Street) Ltd, the court considered issues arising from the operation of the statutory payment regime and the consequences of failing to comply with it.

Of particular interest is the court's discussion of the payment machinery and the notice timetable. The decision contains a helpful review of the authorities and reinforces a number of familiar principles concerning applications for payment, payment notices and notified sums.

Perhaps most importantly, the case underlines the continuing willingness of the courts to apply those principles rigorously.

The decision does not establish any new proposition of law. Rather, it serves as another illustration of how consistently the existing principles continue to be applied. The payment regime is intended to provide certainty. That objective would be undermined if deadlines were treated as flexible or approximate.

The message emerging from the authorities remains the same: if the regime prescribes a deadline, parties should assume it matters.

Why did it matter?

As is often the case in payment disputes, the real issue was not the valuation of the works.

Nor was it primarily a dispute about the wording of a notice.

The dispute turned on whether the relevant deadlines had been met.

That distinction is important. Parties frequently assume that the substantive merits of the dispute will determine the outcome. In reality, procedural issues often become decisive.

A carefully prepared application for payment may achieve nothing if served outside the contractual period. A payment notice that would otherwise be valid may cease to matter if a pay less notice deadline has already expired. A compelling valuation case may struggle to gain traction if the notified sum regime has already taken hold.

Timing remains one of the most common ways in which parties unintentionally undermine otherwise strong positions. 

What do the cases tell us?

Read alongside Deerns and Netomnia, Liberty Roofing reinforces a relatively clear and consistent message.

The courts continue to treat the payment regime as an integrated system.

In Deerns, the problem was the payment machinery itself. The contractual provisions were non-compliant, the Scheme applied and the notice deadlines changed.

In Netomnia, the problem was that the notice failed to comply with the contractual requirements governing its submission.

In Liberty Roofing, the issue was compliance with the timetable operating within that regime.

Those decisions may concern different aspects of the payment process, but they all point in the same direction. Certainty remains central to the operation of the Construction Act.

The courts may adopt a practical and commercial approach to the content of notices. They may be willing to look beyond imperfect drafting where the substance of a claim is clear. What they are generally unwilling to do is disregard the structure of the statutory payment regime itself.

Put another way, the courts may show flexibility towards wording. They continue to show considerably less flexibility towards deadlines.

Lessons for drafting and administration

Three practical points emerge.

1. Establish the timetable before a dispute arises
Parties should ensure they understand:

•    the due date for payment;
•    the final date for payment;
•    the deadline for payment notices; and
•    the deadline for pay less notices.

That exercise becomes particularly important where bespoke amendments have been made to standard payment provisions.

The time to identify uncertainty is before a payment dispute arises, not afterwards.

2. Review the payment regime as a whole
One theme running throughout the recent authorities is that payment provisions, payment notices and notice deadlines cannot sensibly be considered in isolation.

A defect in the payment machinery may alter the timetable. A defect in the notice may prevent a claim taking effect. A missed deadline may render an otherwise valid notice ineffective.

The payment regime should therefore be viewed as a single process rather than a collection of separate obligations.

3. Avoid leaving service until the last day
Many notice disputes could be avoided by serving notices earlier.

Leaving service until the final permissible day creates unnecessary risk, particularly where there may be uncertainty about service provisions, the calculation of dates or the potential application of the Scheme.

A notice received one day late, is simply out of time.

Final thoughts

A common theme emerges from these decisions: the courts' long-established approach to the statutory payment regime remains focused on certainty.

Thirty years since the Construction Act, parties still tend to encounter problems with the same three aspects of the payment regime: the drafting of the payment machinery, the validity of notices and compliance with notice deadlines.

The cases demonstrate that those issues are closely connected.

In Deerns, a defective payment clause altered the payment timetable and rendered pay less notices ineffective.

In Netomnia, the claim itself was not the problem. The problem was the failure to comply with the contractual requirements governing its submission.

In Liberty Roofing, the court again emphasised the importance of complying with the statutory timetable.

Taken together, the themes discussed in our three recent articles point to a simple conclusion. A payment regime is only as effective as the weakest link in the chain. 

This topic will be explored in more detail at our in-person seminar on the financial and commercial risks in construction, taking place in Edinburgh on Thursday 19 November 2026. To RSVP, please register here.

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