Late payment notice template (Construction Act)
Use this when a payment has passed its final date for payment and no valid pay less notice was served. It demands the overdue sum, puts the main contractor on notice of statutory interest, and reserves your right to suspend performance under the Construction Act.
When to use it
Late payment is the single biggest cashflow killer for subcontractors. The law is firmly on your side, but only if you use it. Where a sum was notified — through your application or a payment notice — and no effective pay less notice followed, that sum is due in full. This letter converts a chased phone call into a formal, dated demand that carries real statutory teeth.
The legal backing
- Housing Grants, Construction and Regeneration Act 1996 — the "Construction Act": the right to be paid the notified sum, and the right to suspend performance on seven days' written notice if you're not.
- Late Payment of Commercial Debts (Interest) Act 1998 — statutory interest (8% over base), fixed compensation and reasonable recovery costs where the contract lacks a substantial remedy.
The template
[YOUR COMPANY NAME]
[Your address]
[Main contractor name]
[Their address]
[Date]
Dear [Name],
Re: [Project name / reference] — Overdue payment, application/invoice [number]
Our payment of £[amount] in respect of [application / invoice number], dated
[date], fell due for payment on [final date for payment]. As at the date of
this letter that sum remains unpaid in full.
No pay less notice complying with the payment provisions of our subcontract and
the Housing Grants, Construction and Regeneration Act 1996 has been served in
respect of this sum. The notified sum of £[amount] is therefore due and payable
in full.
We require payment of the outstanding £[amount] within [7] days of the date of
this letter. In default of payment we reserve the right to:
1. Claim interest and compensation under the Late Payment of Commercial Debts
(Interest) Act 1998 (or the interest provisions of the subcontract), and
2. Suspend performance of our obligations under the subcontract on not less
than seven days' further written notice, in accordance with our statutory
right to suspend for non-payment.
We would prefer to resolve this without recourse to those steps and look forward
to receiving payment by the date above.
Yours faithfully,
[Your name]
[Your position]
[Your company]
This template is general guidance, not legal advice. Payment terms, notice deadlines and suspension rights depend on your specific subcontract and the current legislation — check them and take professional advice before issuing, especially before suspending work.
Let Shield write it for you
Shield Index tracks payment risk across every project — applications, due dates, contra-charges and the emails that dispute them. When a payment slips past its final date, it can draft this notice with the figures and dates already in place, and it keeps the whole payment trail hash-stamped so a solicitor can see exactly what was owed and when.
Common questions
What interest can I charge on a late construction payment?
Under the Late Payment of Commercial Debts (Interest) Act 1998, if your contract does not provide a substantial remedy you can claim statutory interest at 8% above the Bank of England base rate, plus fixed compensation of £40, £70 or £100 depending on the size of the debt, plus your reasonable recovery costs. Check your subcontract first, as it may set a different (but still substantial) rate.
Can I suspend work if I am not paid?
Yes. The Housing Grants, Construction and Regeneration Act 1996 gives you the right to suspend performance if a sum due is not paid in full by the final date for payment and no effective pay less notice was issued. You must give at least seven days' written notice of your intention to suspend, stating the ground. Suspension is a serious step — take advice and follow the notice requirements exactly.
What is a pay less notice?
A pay less notice is how a paying party tells you they intend to pay less than the notified sum. To be valid it must be issued by the prescribed deadline before the final date for payment and must state the sum they consider due and the basis for it. If no valid pay less notice was served, the notified sum becomes payable in full.