Interim Application Payment Recovery

Payment Applications

Most standard construction contracts ask for a Payment Application or valuation from payees. This should be submitted in accordance to the contract and begins the process of payment upon submission.

To ensure your Payment Application is valid, you should read the contract payment terms carefully and:

• Value the work according to the method and the date specified on the contract
• Submit within the deadline specified by the contract
• Include the sum due and how it was calculated
• Submit calculations in a summary sheet breaking down all costs relating to the sum
• Title your Payment Application according to the language used in the contract: for instance, if the contract calls it an ‘Interim Payment Application’, use this title to avoid any doubt by the payer.
  
• Make sure you use the correct address and method of service whether it is post or email or some other method.

Payment Notices

In response to the Payment Application, the payer must issue the payee with a Payment Notice. This should usually be given no later than five calendar (not working) days after the Due Date.

Depending on the contract terms, a Payment Notice is usually valid when:

• It is submitted to the payee no later than five days after the Due Date, by the deadline
• It specifies the sum considered to be due and the calculation for this amount.

If the contract does not require the payee to serve a notice in default of a certificate, then unless a pay less notice is served, the sum specified by the Payment Notice constitutes the ‘Notified Sum’ which needs to be paid before or on the contract’s Final Date for Payment. If it is not, the payee may suspend work or adjudicate.

If the payer does not issue a Payment Notice, then the amount submitted in a valid Payment Application becomes the Notified Sum, if the contract states a Payment Application must be made. By failing to provide a Payment Notice, the payer is considered to have agreed to pay the Payment Application’s Notified Sum. However, the payer may send a Notice to Pay Less if they disagree with the sum in question.

Default Payment Notices

In the case that a contract does not expressly provide that a Payment Application should be submitted, then the payee is entitled to serve a Default Payment Notice to the payer as soon as they default (they don’t issue a Payment Notice). Again, the payer can mitigate this by issuing a Notice to Pay Less.

Default Payment Notices are validated in the same way as Payment Applications: by specifying the amount calculated to be due, how these costs were calculated, and by using the same language as the contract. This way, the amount specified by the Default Payment Notice becomes the Notified Sum; unless a Pay Less Notice is served.

It’s advised that you don’t delay if you need to serve a Default Payment Notice, as the Final Date for Payment will then be postponed accordingly. For instance, if the Payment Notice should have been received by March 1st and the Default Payment Notice is issued on the 3rd, the Final Date for Payment is then postponed for two days.

Seek legal advice from Helix Law to ensure any Default Payment Notice you need to serve is valid, and for advice on what to do thereafter.

Pay Less Notices

A Notice to Pay Less (or Pay Less Notice) is the payer’s last opportunity to pay less than the Notified Sum, in whatever form it was made. The contract should specify a deadline for serving a Pay Less Notice. If it does not, the default deadline is seven days prior to the Final Date for Payment in the contract.

Again, this must specify the amount believed to be due and how this calculation was made. This then becomes the Notified Sum which will be due to be paid by the Final Date for Payment in the contract.