The construction industry in Ireland is about to go under its biggest change in this generation. Is your business ready for these changes and are your staff equipped to manage these changes? If not the consequences could be dire!
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What is happening?
On the 25th July 2016 The Construction Contracts Act 2013 came into force across Ireland and it will bring significant changes to how you apply for payment and resolve disputes. The impact of the new legislation cannot be understated. This Act will apply to the vast majority of construction contracts regardless of whether they are in writing or not and you cannot contract out of the Statutory Provisions Act.
What changes?
No pay when paid – Pay when paid is no longer permissible. For example payment owing to a subcontractor cannot be made on the condition that the main contractor receives payment from the employer.
New payment mechanism – Construction contracts must contain “adequate mechanisms” for determining how much is due and determining when that amount is due. The Act also imposes maximum periods of payment for subcontractors which are set at 30 days.
Payment Claim Notice – whatever procedures both contractors and subcontracts are using for applying for payment currently should be replaced with a Payment Claim Notice. The legislation provides that a valid Payment Claim Notice must contain;
- Details of the amount being sought;
- The period, stage or activity to which the payment relates;
- The subject matter of the claim; and
- The basis upon which the amount sought has been calculated.
For this notice to be valid the Payment Claim Notice must be issued within 5 days after the payment claim date.
Withholding Notice – the payer must decide within 21 days whether or not it is going to pay the full amount claimed, if not the payer must issue a withholding notice in accordance with the information detailed within the Act. If this notice is not issued in accordance with the Act the party seeking payment will be entitled to the full amount detailed on the Payment Claim Notice without any right to set-off or abatement.
Dispute Resolution – a party to a construction contract, as defined under the Act, will have a new right to refer a payment dispute relating to payment to adjudication at any time, this is regardless of any other dispute resolution mechanism detailed within the contract. The decision of the adjudicator will be binding on the parties until an arbitrator or a court determine otherwise.
What do you need to do?
- Provide training to key staff on the payment provisions of the Act in order that they fully understand the new regime.
- Provide training to key staff to gain a better understanding of the adjudication process
- Amend terms and conditions to ensure compliance with the Act
- Prepare pro forma compliant Payment Claim Notice
- Prepare pro forma compliant withholding notices and set up processes and procedures to ensure they are issued when required
- Implement an early warning system for disputes
Contact Elemental to arrange a FREE Consultation on the potential impact on your business.
Telephone: 1800 938833