Is a construction retention valid if it contains a ‘pay when paid’ clause?

‘Pay when paid’ clauses are illegal under the Housing Grants Construction and Regeneration Act 1996. Such clauses are another source of delay for contractors waiting for payment.

Despite their illegality, ‘pay when paid’ clauses remain surprisingly commonplace in construction contracts. Such provisions purport to allow the contractor to delay payment to the subcontractor until the contractor has received payment from the project owner but they are not valid or enforceable even if the other party willingly agreed to it.

Now that ‘pay when paid’ clauses are unlawful, the main contractor must still pay the subcontractor even if the project owner has defaulted and is late with their payment or does not pay at all.