Payment Questions Flashcards
When is a contractor entitled to interim payments under a construction contract?
- In accordance with the Housing Grants, Construction and Regeneration Act 1996, contractors are entitled for interim payments for any construction contract which lasts over 45 days.
What is the interest rate for late payments?
- Statutory interest of 8% above the bank of England base rate UNLESS an alternative ‘substantial remedy’ is defined within the construction contract (generally taken to be between 2%-5%).
How did you undertake the interim valuations and ensure an accurate valuation?
- I received the contractor’s applications for payment and undertook an initial check to ensure there was sufficient detail to allow an accurate assessment of the application. This included ensuring a breakdown of costs was provided for all items including preliminaries, schedule of works, mechanical and electrical works and variations.
- I undertook a detailed site inspection during which I could inspect the works and assess each aspect of the valuation in detail.
- I issued queries to the contractor if further clarification was required on any costs, including requests for receipts, invoices or sub-contractor quotes where appropriate.
- If appropriate, I produced a marked-up copy of the contractor’s interim application to show all adjustments and reasons for such adjustments.
- Following agreement with the contractor, I then issued the interim certificate within five days of the due date.
Outline the payment timeline under the JCT MW / IC 2016 contract?
The contractor can make an application for payment any time before the Interim Valuation Date (IVD). The Due Date is 7 days after the IVD, and the Final Date for Payment is 14 days after the Due Date. The employer must issue a Payment Notice within 5 days of the Due Date.
Here’s a more detailed breakdown:
Interim Valuation Date (IVD):
The IVD is the date when the interim valuation of the works is completed.
Due Date:
This is 7 days after the IVD. It’s the date the contractor expects to receive payment for the works valued.
Final Date for Payment:
This is 14 days after the Due Date. This is the latest date the employer is required to make the payment.
Payment Notice:
Within 5 days of the Due Date, the employer must issue a Payment Notice, stating the sum considered due and the basis for the calculation.
DWL Answer:
- Contractor to issue interim application any time before the common valuation date.
- Due date is set as seven calendar days after the common valuation date.
- Contract administrator to issue interim certificate within five calendar days after the due date.
- Final date for payment set as fourteen calendar days after due date.
- Contract administrator to issue pay less notice no later than five calendar days before the final date for payment.
What is included on an interim certificate?
- The contract sum.
- Gross valuation.
- Gross valuation less the retention.
- Gross valuation less the retention and amount previously certified.
- Net amount due to the contractor in figures and words.
- Final date for payment in relation to due date.
- Signature of the chartered contract administrator.
Why is it important the contract administrator issues the interim certificate within five calendar days after the due date?
What happens if the contract administrator does not submit the interim certificate by the required date?
- The contractor’s interim application automatically becomes an interim payment notice if it was issued by the common valuation date.
- If the contractor does not submit an interim application by the common valuation date and the contract administrator does not submit an interim certificate, the contractor can issue a default payment notice.
- The employer will then have to pay the contractor the sum detailed on interim payment notice or default payment notice unless the contract administrator submits a pay less notice no later than five days before the final date for payment.
