HGCR Act 1996 & LDEDC Act 2009 Question Bank

Question 1

What are the key provisions of the Housing Grants, Construction and Regeneration Act 1996?

Answer 1

• Changes to the Act improve payments within the construction industry to provide for a quicker and less-costly dispute resolution procedure.
• The Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009 has numerous key provisions relating to construction contracts:

o Parties to a construction contract have the right to refer a dispute to adjudication at any point.
o Details key timescales for the appointment of an adjudicator and final decision of the adjudicator.
o Parties to a construction contract are entitled to interim payments if the contract period is greater than 45 days.
o The Scheme for Construction Contracts Regulations apply if the contract does not comply with the Housing Grants, Construction and Regeneration Act 1996.

Question 2

What are the key changes made to the Housing Grants, Construction and Regeneration Act by the Local Democracy, Economic Development and Construction Act 2011?

Answer 2

The Local Democracy, Economic Development and Construction Act 2011 (LDEDCA) significantly amended the Housing Grants, Construction and Regeneration Act 1996 (HGCRA), primarily focusing on improvements to the construction industry’s payment and adjudication processes. Key changes included a new payment regime, enhanced suspension rights for contractors, and some modifications to the statutory adjudication process. These amendments, effective from October 1, 2011, aimed to increase clarity and certainty in construction contracts, particularly regarding payments.
Here’s a more detailed breakdown of the
key changes:

1. Enhanced Payment Regime:
   New Payment Notice Requirements:
   The LDEDCA introduced stricter requirements for payment notices, including changes to the notice regime and allowing for clauses that permit employers to withhold payments without notice in specific circumstances, such as contractor insolvency.
   Increased Clarity and Certainty:
   The amendments aimed to increase clarity and certainty in the payment process, making it more straightforward for both contractors and clients.
   Fairer Payment Regime:
   The LDEDCA was intended to introduce a more equitable payment regime within the construction industry.
2. Improved Suspension Rights:
   Enhanced Right to Suspend:
   The LDEDCA provided contractors with enhanced rights to suspend work for non-payment, offering them greater protection in such situations.
   New Rights for Suspension:
   The amendments included new rights for contractors who suspend performance due to non-payment, including the right to claim costs and expenses incurred and an extension of time resulting from the suspension.
3. Changes to Adjudication:
   Limited Changes:
   While the LDEDCA did make some changes to the statutory adjudication process, they were not as extensive as the changes to the payment regime.
   Making Adjudication More Accessible:
   The amendments aimed to make the adjudication process more accessible and user-friendly.
4. Application to More Contracts:
   Extended Application:
   The 2011 amendments extended the application of the Construction Act to oral and part-oral contracts, aiming to encompass a wider range of construction agreements within the Act’s framework

Question 3

3) What are the key changes made to ADJUDICATION by the Local Democracy, Economic Development and Construction Act 2009?

Answer 3

Application to Oral and Partly Oral Contracts:
The Act extended the Construction Act’s scope to include contracts that are entirely or partly oral, broadening the ability to refer disputes to adjudication.

Statutory Slip Rule:
Section 108(3A) introduced a statutory slip rule, allowing adjudicators to correct clerical or typographical errors in their decisions. (within 5 days of adjudication decision).

Costs of Adjudication:
The Act addressed the allocation of adjudication costs, making it more difficult to pre-determine who would bear the costs before an adjudicator was appointed, unless the parties agreed after the adjudication notice was given.

Question 4

What are the key changes made to PAYMENT PROVISIONS by the Local Democracy, Economic Development and Construction Act 2009?

Answer 4

New Payment Regime:
The LDEDCA replaced the previous payment notice and withholding notice regime with a new system centered around the “notified sum”.

Payment Notice:
A payment notice must be issued by either the payer or the payee (or a specified person) specifying the amount due under an interim payment and the basis for its calculation. This notice must be issued within 5 days of the due date, even if the notified sum is zero.

Pay Less Notice:
If the payer disputes the amount in the payment notice, it can issue a “pay less notice” detailing the amount it intends to pay.

Requirement to Pay Notified Sum:
The LDEDCA introduced the requirement for the payer to pay the notified sum, unless a pay less notice has been served.
2. Conditional Payment Clauses Abolished:

“Pay-when-certified” clauses outlawed:
The LDEDCA removed the ability of a contract to link payment in a subcontract to the performance of obligations under a superior contract (main building contract).

Improved Cash Flow:
This change aimed to improve cash flow throughout the supply chain by ensuring subcontractors are paid regardless of whether the main contractor has received payment.

Question 5

Outline the process relating to a contractor suspending performance for non-payment?

Answer 5

• The contractor is able to suspend performance (including all contractual obligations such as insurance) for non-payment by the final date by payment.
• The contractor must give seven days notice of the intention to suspend performance.
• The right to suspend performance ceases when the relevant payment is made.
• The contract completion date is automatically extended by the number of days of suspension.

Question 6

What happens if a construction contract does not comply with the Housing Grants, Construction and Regeneration Act 1996?

Answer 6

• If a construction contract does not comply the Housing Grants, Construction and Regeneration Act 1996, the Scheme for Construction Contracts Regulations applies.
• Part 1 of the scheme details adjudication procedures if the contract does not comply with the adjudication procedures.
• Part 2 of the scheme details payment procedures if the contract does not comply with the payment procedures.