What happens in the second act?

Last week’s announcement that it has won a slot in the Queen’s speech came as good news to most of us, not least the industry lobbyists and the lawyers, who suddenly find themselves with a lot of work on their hands – and how they do that work could have a big impact on the entire sector.

So why is it good news? Well the consensus is that the 10-year-old act has been almost as frustrating as it has been beneficial. The rules on adjudication and payment have certainly reduced strife, but their poor drafting has led to many loopholes that abuse the spirit of the law and deficiencies that have hampered its efficacy.

Details of what’s in the new legislation won’t be revealed until we have sight of a draft of them, probably some time this summer, but the expectation is that it will follow the outline set out during last summer’s consultation. If that’s the case we can expect some important changes. For a start, you will be able to go to adjudication without a written contract: at the moment oral contracts aren’t recognised by the act. Then there’s the doing away with so-called Tolent clauses, which require the referring party in an adjudication to pay all the costs win or lose. Both these reforms are fairly non-contentious as they are clearly following parliament’s intentions. And specialists will be delighted if hated pay-when-certified clauses are outlawed, and if the payment framework creates a clear entitlement to interim payment.

The real fight is over payment notices, which are an area of weakness in the legislation. If the draft remains true to last year’s consultation, it will propose reinforcing payment notices with a mechanism that allows the payer to tell the payee what is likely to be paid and when – with provision for wrangles afterwards. Specialists would like it to be the other way round. They want to be able to invoice for work, and they want the onus of proof to be on the client if it wants to contest that invoice. Though there are sympathetic arguments for adopting this approach, it’s difficult to see how it could be made to work in a way that wouldn’t be unfair to the rest of the team.

There are also only so many times that officials can listen to an argument. Of course, there’s nothing to stop lobbyists bending the ears of MPs. Good luck to them (page 12). But they have to remember that the reforms are only a small part of an important housing bill organised by the communities department, which will not have the same interest in them as the department formerly known as the DTI. If they make too much fuss over the payment rules, they risk losing the baby, the bathwater and probably the bath as well.

Denise Chevin, editor