Recovery of Reasonable Costs after 16 March 2013

The right to claim the “reasonable costs” of recovering a debt only arises when:

1. the Act applies i.e. when there is no alternative “substantial remedy” for late payment in the contract; AND

2. the fixed sum of £40, £70 or £100 (depending on the value of the debt) does not cover the payee’s reasonable costs of recovering the debt.

It is not clear from the Regulations what is meant by “reasonable costs”, and this has led some to question whether the costs of adjudication or legal proceedings can be recovered as “reasonable costs”. However, although the courts have yet to clarify the issue, it is unlikely the Regulations will be interpreted in this way.

The legal costs of adjudication are irrecoverable and the Housing Grants, Construction and Regeneration Act 1996 (as amended) prohibits contracting parties from including any term in their contracts which provides for one party to the pay the other’s legal costs incurred in adjudication. It would therefore be contradictory if the Regulations allowed the recovery of legal costs in adjudication proceedings.

As far as legal proceedings are concerned, if the Regulations permitted the automatic recovery of legal costs, this could undermine both the detailed procedural rules and the courts’ general discretion in relation to the award of costs.

It therefore seems that the “reasonable costs” which payees can recover under the Regulations will be limited to costs incurred prior to formal debt recovery proceedings, such as the administrative costs of sending letters and possibly the cost of preliminary legal assistance such as solicitors’ letters.

Payees should, however, note that it is unlikely the paying party will voluntarily pay their “reasonable costs”, at least not without considerable scrutiny of the costs incurred. In some cases, it may be necessary to consider legal action in order to recover costs, which is unlikely to be appropriate unless significant costs have been incurred. Payees should therefore ensure they keep detailed records of the costs they incur in recovering debts.

Ref Source: Hawkswell Kilvington www.hklegal.co.uk

Late Payment under Construction Contracts

 

The Late Payment of Commercial Debts Regulations 2013 (the “Regulations”) came into force on 16 March 2013. They apply to all commercial contracts, including construction contracts, entered into after this date. The Regulations amend the Late Payment of Commercial Debts (Interest) Act 1998 (the “Act”) by introducing new remedies for late payment.

Remedies for Late Payment For Contracts Entered Into Before 16 March 2013

The Act implies into contracts a statutory rate of interest on late payments of 8% above the Bank of England base rate. The Act also allows payees to recover a fixed sum as compensation for late payment of a debt. The fixed sums are £40 (for debts up to £999.99), £70 (for debts £1,000-£9,999.99) or £100 (for debts over £10,000).

Remedies for Late Payment For Contracts Entered Into After 16 March 2013

The Regulations implement EC Directive 2011/7/EU, which attempts to combat late payments in commercial transactions across the EU by increasing suppliers’ rights.

The Regulations introduce two new rights for payees which exist in addition to the rights already available under the Act:

1. A right for payees to claim the “reasonable costs” incurred in recovering the debt.

2. A right to claim statutory interest after 60 days.

These additional rights only apply to contracts entered into after 16 March 2013.

Ref Source: Hawkswell Kilvington www.hklegal.co.uk

Government to End Self build Tax - GIVE YOUR FEEDBACK

As you will by now be aware, on April 15th the Government announced that it proposes to exempt self builders from paying the Community Infrastructure Levy (CIL).
CIL, which was introduced under the Labour Government but began to be implemented by some councils in January 2012 (and now affects thousands of self builders in dozens of local authorities), raised a levy on new homes set at a standard charge per m² of new development. On average, self builders and developers affected by CIL were being asked to pay £100-150/m² – typically adding 10-15% onto build costs. Homebuilding & Renovating and NaSBA have been campaigning on this issue.

The result is that the Government now proposes to scrap CIL for self builders but, as part of the legislative process, has launched a consultation on the change. We are keen for as many self builders (all of whom could be affected by CIL charges in the future) and companies with an interest in the self build industry (which has seen many projects postponed or downsized as a result of CIL) to respond. If the consultation is not in favour of the self build exemption, CIL may well affect 1,000s of self builders in years to come.

NaSBA are co-ordinating the consultation process. We urge you to take two minutes to comment.

http://www.nasba.org.uk