NEC Y(UK)2 brings the UK's Construction Act into the contract's payment rules: it fixes the due date and final date for payment, makes the certificate the payment notice and sets the rule for pay less notices. If the Construction Act of 1996 applies and this Option is missing, the payment terms may not comply, and the statutory Scheme can step in to fill gaps.
The Option's full title names the Housing Grants, Construction and Regeneration Act of 1996, and it takes account of the changes made in 2009. It's among the UK-specific NEC secondary Options and is close to essential on most UK construction work the Act covers. Take advice if you aren't sure the Act applies to your project.
What the Option does
| Subject | What it says | NEC4 | NEC3 |
|---|---|---|---|
| How days are counted | Excludes Christmas Day, Good Friday and bank holidays, in the way the Act does | Y2.1 in the subcontract text | Y2.1 |
| Dates for payment | Sets the due date, final date and what the certificate does | Y2.2 | Y2.2 |
| Pay less notice | To pay less than the notified sum, give notice at least seven days before the final date for payment | Y2.3 | Y2.3 |
| Suspension | Suspending under the Act is a compensation event | Y2.5 | Y2.4 |
Watch the suspension number: it moved from Y2.4 in NEC3 to Y2.5 in the NEC4 ECC, PSC and PSS. The NEC4 ECS text prints Y2.4 for both the termination rule and suspension. The extra clause covers what happens to an unpaid certified sum on termination for some of the listed reasons, in the NEC4 PSC, PSS and subcontract wording. In NEC4, the pay less rule stays at Y2.3.
The periods
The NEC3 ECC says payment becomes due seven days after the assessment date, with the final date for payment two weeks later, or another period the Contract Data states. In the NEC4 subcontract text it's fourteen days to the due date, not seven. The due date can differ by form and version, so check the Option in your own contract rather than relying on memory.
A dated example
This is a fictional NEC3 ECC contract with no change to the final date period. The assessment date is 1 June, in a month with no bank holidays in the period.
| Event | Date |
|---|---|
| Assessment date | 1 June |
| Payment becomes due | 8 June |
| Latest date for a pay less notice | 15 June |
| Final date for payment | 22 June |
The Project Manager's certificate says £300,000 is due. The Client later wants to deduct £40,000 for delay damages. It gives a pay less notice on 14 June, stating £260,000 and how that was worked out. It can then pay £260,000 by 22 June. If the notice goes out on 16 June, it's too late, and the £300,000 notified sum remains payable. See pay less notices and the payment timeline.
Why it matters in practice
- The certificate has legal force. It's the notice of payment and states the notified sum. A casual or late certificate is more than an admin problem.
- Either Party can give a pay less notice. Pay less applies whichever Party owes the money, including where a sum is due from the Contractor to the Client.
- Deductions need a notice. A Party doesn't withhold payment of an amount due without one. It's not enough to say so in a meeting.
- Suspension is protected. A Contractor who has properly suspended for non-payment has a compensation event for the effect. Take advice before suspending, because a wrongful suspension could be serious.
What people get wrong
- Counting weeks rather than days. Periods in days exclude certain holidays, so a date worked out by counting back from the calendar can be wrong around Christmas and Easter.
- Using NEC3 numbers in NEC4 letters. It's Y2.5 for suspension in NEC4. A wrong reference won't always be fatal, but it looks careless and may cause an argument.
- Assuming a Z clause changes everything. Parties can amend the Option, but the Act sets minimum rules. Unusual payment schedules need a legal check.
- Forgetting about adjudication. The Act also gives a right to adjudicate at any time. That is why Option W2 normally goes with Y(UK)2.
Related guides
- NEC Secondary Options: X, Y, W and Z Clauses Explained
- Y(UK)3: Third Party Rights
- W1: Dispute Resolution Where the Act Does Not Apply
- W2: Dispute Resolution Under the Construction Act
- Early Contractor Involvement Under NEC
- Y(UK)1: Project Bank Account
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This guide is general information in our own words, not legal advice. Your contract and its Contract Data always govern. NEC, NEC3 and NEC4 are trade marks of Thomas Telford Ltd; Contract Status is not affiliated with or endorsed by NEC.