No sector suffers late payment like construction. Long payment chains, contested valuations and retentions held for years mean contractors and subcontractors routinely carry large unpaid balances. Understanding the specific mechanics of construction debt — and the option to sell it — can transform a firm's cash flow.
Why construction debt is different
Construction runs on a distinctive payment system governed by the Construction Act (the Housing Grants, Construction and Regeneration Act 1996, as amended). Payment is made against applications and interim valuations, subject to payment and pay-less notices, and often with money held back as retention.
The retention problem
Retention is a percentage of each payment (commonly 3–5%) held back by the paying party as security for defects. Half is typically released at practical completion, the rest at the end of the defects period — often years later. Too frequently, retentions are released late, disputed, or lost entirely when the payer becomes insolvent.
Retentions represent money the contractor has already earned but cannot yet touch — a huge, sector-wide drag on cash flow.
Payment applications and notices
- The contractor submits a payment application for work done.
- The payer must issue a payment notice, or the application becomes the notified sum.
- To pay less, the payer must serve a valid pay-less notice in time.
- Miss the notice deadlines and the full applied sum can become due — a powerful lever for the unpaid contractor.
Routes to recover construction debt
- Adjudication: a fast, 28-day statutory process well suited to construction disputes.
- Court proceedings for a CCJ where the debt is clear.
- Selling the receivable to a buyer who specialises in construction debt.
Selling construction receivables
Where a payer is stalling, disputing or heading towards insolvency, waiting can be fatal to a subcontractor's own cash flow. Selling the debt — whether an unpaid application, a withheld retention or a judgment — converts a stuck balance into immediate cash and passes the recovery effort to the buyer. Well-documented construction debts, especially those backed by adjudication decisions or judgments, are attractive to buyers.
➜ Sell your construction debt from £19.90
Keep your paperwork tight
The value of a construction debt lives in its documentation: the contract, the applications, the notices (or the absence of the payer's notices), the valuations and any adjudication decision. Keep it organised — it is what proves the debt and drives the price when you sell.
Conclusion
Construction debt is uniquely complex, but the Construction Act gives contractors real leverage through applications, notices and adjudication. Where a debt is stuck or a payer is failing, selling the receivable is a fast way to protect your own cash flow. Master the paperwork, use the deadlines, and do not let hard-earned money sit unpaid.
