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Pay Less Notices Under the Construction Act (UK)

What a Pay Less Notice is, when it must be issued, and what happens if you miss the deadline. Includes worked examples for UK construction contractors.

Overview

A Pay Less Notice is one of the most important — and most misunderstood — mechanisms in UK construction payment law. It allows the payer to reduce the amount they pay below the notified sum, but only if the notice is issued correctly and on time. Getting it wrong means paying the full amount, even if you have legitimate deductions.

What Is a Pay Less Notice?

A Pay Less Notice is a formal notice issued by the payer (client, main contractor, or other paying party) stating that they intend to pay less than the notified sum. The "notified sum" is the amount stated in the Payment Notice — or, if no Payment Notice was issued, the amount in the payee's application for payment.

  • Allows the payer to reduce the payment below the notified sum
  • Must state the sum the payer considers to be due
  • Must state the basis for calculating that sum
  • Must reference specific grounds for the deduction (defects, contra charges, etc.)

When Must a Pay Less Notice Be Issued?

Under the Construction Act (as amended), a Pay Less Notice must be issued at least 7 days before the final date for payment, unless the contract specifies a longer period. The contract cannot shorten this to less than 7 days. Missing this deadline means the full notified sum must be paid.

  • Deadline: at least 7 days before the final date for payment
  • The contract can extend this period but cannot shorten it below 7 days
  • The notice must be in writing
  • Missing the deadline = obligation to pay the full notified sum

What Must a Pay Less Notice Contain?

A valid Pay Less Notice must meet specific requirements. A vague or incomplete notice may be treated as invalid, which means the full notified sum becomes payable. The courts have been strict on the content requirements.

  • The sum the payer considers to be due at the date of the notice
  • The basis on which that sum is calculated
  • Enough detail for the payee to understand the deductions
  • Specific grounds — generic reasons like "quality issues" are not sufficient

Common Grounds for a Pay Less Notice

The most common reasons for issuing a Pay Less Notice include defective work, liquidated and ascertained damages, contra charges, over-measurement, disputed variations, and set-off for amounts owed on other contracts (where contractually permitted).

  • Defective or incomplete work requiring remediation
  • Liquidated damages for delay
  • Contra charges for work done by others due to non-performance
  • Over-measurement or valuation disagreements
  • Disputed or unapproved variations
  • Retention deductions not already accounted for

What Happens If No Pay Less Notice Is Issued?

If the payer fails to issue a valid Pay Less Notice before the deadline, they must pay the full notified sum by the final date for payment. The payee can then enforce payment through adjudication if it is not received. This is one of the strongest protections the Construction Act provides to contractors and subcontractors.

  • The full notified sum becomes a debt due from the payer
  • The payee can refer the matter to adjudication for enforcement
  • The payer cannot withhold money after the deadline has passed
  • Interest may apply on late payments under the Late Payment of Commercial Debts Act

Worked Example: Pay Less Notice Timeline

Suppose a subcontractor submits an application for payment of £50,000 on 1 March. The due date under the contract is 7 March. The main contractor issues a Payment Notice on 10 March stating £45,000 is due. The final date for payment is 21 March. To pay less than £45,000, the main contractor must issue a Pay Less Notice by 14 March (7 days before the final date). If they miss 14 March, they must pay £45,000.

  • 1 March — Application submitted: £50,000
  • 7 March — Due date
  • 10 March — Payment Notice issued: £45,000 (notified sum)
  • 14 March — Pay Less Notice deadline (21 March minus 7 days)
  • 21 March — Final date for payment

Key Takeaways

  • A Pay Less Notice must be issued at least 7 days before the final date for payment
  • The notice must clearly state the sum considered due and the basis for the calculation
  • Missing the deadline means the full notified sum must be paid — no exceptions
  • Courts are strict on the content requirements — vague notices are invalid
  • Track every deadline digitally to avoid costly mistakes on both sides

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Frequently Asked Questions

Is a Pay Less Notice the same as a Payment Notice?
No. A Payment Notice states the amount the payer intends to pay. A Pay Less Notice is issued afterwards to reduce that amount below the notified sum. They serve different purposes and have different deadlines.
Can a Pay Less Notice be issued by email?
It depends on the contract. The Construction Act requires the notice to be in writing, and many contracts accept email as valid written communication. Check your contract's notice provisions to be sure.
What if the payer issues a Pay Less Notice but it is invalid?
An invalid Pay Less Notice (e.g., too vague, issued late, or missing the required content) is treated as if no notice was issued. The payer must then pay the full notified sum by the final date for payment.
Can Site Samurai help track Pay Less Notice deadlines?
Yes. Site Samurai's applications for payment module tracks all Construction Act deadlines automatically, including Payment Notice and Pay Less Notice dates. You get alerts before deadlines and a full audit trail of every notice.

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