Legal Developments in Construction Law September 2026

1. High Court Holds that an "Event-based" Final Date for Payment Clause is Not Construction Act Compliant

In Deerns UK Limited v VDC LHR11 Limited [2026] EWHC 1509 (TCC), the High Court considered whether a consultancy agreement's final date for payment mechanism complied with s110(1) of the Housing Grants, Construction and Regeneration Act 1996 (the "HGCRA").

Deerns UK Limited ("Deerns") was engaged under a consultancy agreement dated 23 April 2025 (the "Contract") to provide engineering consultancy services for a development at Chandos Park Estate, London NW10. Clause 7.2 of the Contract fixed the due date for each instalment by reference to specified dates in Schedule 1, and provided that the final date for payment was 30 days after the due date; save that if Deerns' invoice was issued late, the final date for payment would be postponed by the same number of days. VDC LHR11 Limited ("VDC") served pay less notices in respect of payment applications 7 and 8, which were timely under its own reading of the Contract, but late if the Scheme for Construction Contracts (the "Scheme") applied instead. Deerns claimed £910,501.71 plus VAT, contending the Contract failed to provide a compliant final date for payment so that the Scheme governed and VDC's notices were out of time.

The Court determined the following key issues:

• Interpretation and s110(1) compliance: Applying ordinary principles of contractual interpretation, the Court held that clause 7.2 was clear: due dates and interim valuation dates were fixed, but the final date for payment could be postponed by reference to late issue of Deerns' invoice. The Court found s110(1)(b) of the HGCRA gives parties discretion only as to the length of the period between the due date and the final date for payment which must be fixed and certain, not to peg that period to an event or mechanism. As the interval here could move depending on late invoicing, the Contract failed to provide a final date for payment compliant with s110(1).
• Application of the Scheme: Non-compliance triggered the Scheme under s110(3) of the HGCRA but VDC argued that the Court should preserve the parties' intended 30-day period rather than substitute the Scheme's 17 days, as this would do the "least violence" to the parties' agreement. However, the Court held Paragraph 8 of the Scheme is mandatory and unequivocal and the Court has no power to redraft the parties' bargain to make it retrospectively compliant. The final date for payment for both applications was therefore 17 days after the due date.
• Pay less notices out of time: Applying the Scheme, pay less notices were required by 16 February and 18 March 2026 (five days before the Scheme's 17-day final dates). VDC's notices, served on 27 February and 25 March 2026, were both out of time, entitling Deerns to the notified sums.
• Estoppel and stay arguments: VDC's fallback estoppel by convention argument—that a shared understanding meant the due date, not the final date interval, moved with late invoicing—was determined on the merits rather than deferred for full pleadings and cross-examination. The unsuitability of Part 8 for contested estoppel issues is not an absolute rule; VDC's evidence was found to be vague and unsupported by contemporaneous correspondence and the estoppel argument failed. VDC's separate application for a stay of execution also failed as Deerns' cash-flow difficulties were caused substantially by VDC's own non-payment, defeating the stay application notwithstanding VDC's prospective £25–30m cross-claim.

Key points for the UK construction industry:

• A final date for payment clause complies with s110(1) of the HGCRA only if the interval between the due date and final date is always fixed. Pegging it to an event or mechanism (e.g. late invoicing) is non-compliant, whether the event occurs before or after the due date.
• Where non-compliant, the Scheme's mandatory 17-day period under paragraph 8 applies in full. Courts cannot preserve a longer contractual period to avoid a perceived "windfall" to the payee.
• Audit payment mechanisms in consultancy and construction contracts need to ensure the final date for payment cannot be altered by invoicing or other procedural events.
• Estoppel by convention requires clear, particularised evidence of a communicated, shared understanding; vague or generalised assertions will not derail Part 8 proceedings or displace statutory payment obligations.
• A payee's financial distress caused by the payer's own non-payment will not justify a stay of execution of a "smash and grab" judgment, even against a substantial disputed cross-claim.

Deerns UK Ltd v VDC LHR11 Ltd [2026] EWHC 1509 (TCC) (23 June 2026)

2. High Court Confirms Conclusive Effect of JCT Final Statement where Employer Fails to Issue Timely Dispute Notice

In Oakland Wantage Care Home Limited v Stepnell Limited [2026] EWHC 1530 (TCC), the High Court considered, on a CPR Part 8 claim, what constitutes a "Final Statement" under clause 4.24 of the JCT Design and Build Contract 2016 and the consequences of failing to issue a timely clause 4.24.6 notice disputing the sums in the Final Statement.

Oakland Wantage Care Home Limited ("Oakland") engaged Stepnell Limited ("Stepnell") under a JCT Design and Build Contract (2016 edition, as amended) (the "Contract") for the design and construction of a 65-bed care home in Wantage, Oxfordshire. Works were certified as practically complete in April 2021. In February 2022, Stepnell sent the Employer's Agent a document headed "draft FA" / "Forecast of the FA" totaling £8,547,434.96, with several line items marked "TBA" or "budget" and further particulars promised. The Employer's Agent responded in March 2022, disputing the sums. After a two-year hiatus, Stepnell submitted a further statement in February 2024 and referred a dispute to adjudication. The Adjudicator held that the February 2024 Statement was the relevant Final Statement and as there was no Final Payment Notice issued the whole of the notified sum was due to Stepnell. Oakland paid the adjudicated sum and subsequently brought a CPR Part 8 claim seeking declarations that the February 2022 document was the operative Final Statement, that conclusivity had not attached, and that it remained entitled to pursue a true-value determination.

In assessing the claim, the Court considered the following key issues:

• What constituted the "relevant statement": Applying the objective reasonable-recipient test from Advance JV v Enisca, the Court held that the February 2022 document was not the Final Statement. It was headed "draft," contained forecast/budget figures, and expressly promised further particulars. A reasonable recipient would not have treated it as a Final Statement notwithstanding use of the phrase "final account" in covering correspondence. The February 2024 Statement was therefore the relevant statement under clause 4.24 of the Contract.
• Criteria for a Final Statement: The document need not bear a specific title but must in substance satisfy the contractual requirements of clause 4.24.2 of the Contract (setting out the adjusted Contract Sum, the balance due, and the basis of calculation) and must objectively be intended as such—free from ambiguity, draft language, or provisional figures.
• Conclusiveness under clause 4.24.6: The Court held that a notice "disputing anything in" the Final Statement must post-date the Final Statement itself. Correspondence predating its issue, even if it disputed the same underlying sums (as was the case with the Employer's Agent's March 2022 response), cannot satisfy the notice requirement. As no such notice was given after the February 2024 Statement, it became conclusive as to the sum due.
• Employer's right to pursue true valuation: Because conclusivity had attached, the Court was unable to grant Oakland's declaration that it was entitled to adjudicate or issue proceedings on the true value of the Final Account.

The claim failed on all issues and the Court was unable to grant any of the declarations sought by Oakland.

Key points for the UK construction industry

• Labelling matters less than substance, but draft/forecast language and provisional figures can be fatal—a document headed "draft," containing "TBA" figures and promising further particulars, will not be treated as a Final Statement even if internally described as "the final account."
• The test for a Final Statement is objective, being how a reasonable recipient, aware of the contractual and factual context, would have understood the document—not the sender's subjective intention, nor the view of an experienced adjudicator.
• A contractual dispute notice must post-date the actual Final Statement—reliance on earlier correspondence, however substantive, is legally insufficient.
• Conclusive evidence clauses will be enforced according to their terms; parties who fail to raise a timely, correctly directed dispute notice after the true Final Statement risk losing any right to challenge the final account.
• Employers and contractors should record the date of issue of any document intended to operate as the Final Statement and ensure any dispute notice is issued afresh, directed at that document, within the contractual window.

Oakland Wantage Care Home Ltd v Stepnell Ltd [2026] EWHC 1530 (TCC) (23 June 2026)

3. Court Delivers Guidance on BSA Contribution Claims and Extraterritorial Reach of Building Liability Orders against Foreign Defendants

In HB (WM) Limited & Others v Sto Limited & Others [2026] EWHC 1833 (TCC), the High Court dismissed applications by two German-domiciled defendants to set aside service out of the jurisdiction, delivering important guidance on sections 130 and 149 of the Building Safety Act 2022 (the "BSA") and contribution claims under the Civil Liability (Contribution) Act 1978 (the "Contribution Act") in defective cladding cases.

The applications

The Second Defendant, Sto SE & Co KGaA ("Sto Germany"), a German manufacturer, and the Third Defendant, Stotmeister Beteiligungs GmbH ("SBG"), a German holding company and majority shareholder in Sto Germany, applied to set aside orders permitting service out of the jurisdiction. SBG additionally sought to set aside an extension of time for service of the claim form in one of proceedings the subject of the application.

Background

Three related claims were brought by developer claimants within the Barratt Redrow and Lendlease groups concerning cladding products used in 18 high-rise buildings, the combined claims being valued at approximately £90 million. Following the Grenfell Tower fire tragedy, the buildings were found to have the StoTherm Classic External Wall System (the "Sto system"), containing combustible EPS insulation and allegedly defective detailing that bypassed cavity barriers. The First Defendant, Sto Limited ("Sto"), the UK manufacturer and supplier, is in administration in Scotland. The Claimants allege misleading statements in BBA certificates and marketing literature issued in the names of both Sto and Sto Germany, and that the system was inherently defective.

The claims sought: (i) contribution from Sto and Sto Germany under the Contribution Act on the basis of liability under section 149 of the BSA; and (ii) building liability orders ("BLOs") under section 130 of the BSA against Sto Germany and SBG to transfer Sto's liabilities to them, underpinning further contribution claims.

Setting aside service out of jurisdiction

The Court confirmed the test to be applied is whether in relation to a foreign defendant there is a serious issue to be tried on its merits and the test is whether the claim has a real, as opposed to fanciful, prospect of success — the same threshold as summary judgment. Citing Okpabi v Royal Dutch Shell [2021] UKSC 3, Mr Justice Moody emphasised judicial restraint and the avoidance of mini-trials, noting that factual statements in support of the claim should be accepted unless "demonstrably untrue or unsupportable." The Court observed that it would not generally be appropriate to strike out claims in areas of developing jurisprudence, and that sections 130 and 149 of the BSA are new provisions whose scope remains to be determined.

Section 149 of the BSA

Section 149 creates a new statutory tort concerning past defaults relating to cladding products, with a 30-year retrospective limitation period. The first condition to be met in section 149(2)(a) requires either non-compliance with a cladding product requirement; making a misleading statement in supply of the product; or manufacturing an inherently defective cladding product. The Court held that the Claimants had a real prospect of success on all three grounds against Sto Germany, the detailed factual points raised by the Defendants being unsuitable for summary determination in this developing area.

Contribution Act issues

The Court confirmed the contribution claims had a real prospect of success: the Claimants had potential liability to building owners under the Defective Premises Act 1972 or the BSA, and the Defendants could be liable to the same owners under sections 130 and 149 of the BSA, satisfying the liability for the "same damage" requirement. Drawing on BDW Trading Ltd v URS Corporation Ltd [2025] UKSC 21, the Court held that a claimant may issue contribution proceedings before the cause of action has fully accrued.

Extra-territoriality and applicable law

The Defendants argued that BLOs could not be made against SBG as this would impermissibly give the BSA extra-territorial effect. Following Cox v Ergo Versicherung AG [2014] AC 1379, the Court held that the correct approach was to undertake an applicable law analysis first, and only then ask whether a mandatory rule of the forum displaced it. Since section 149 creates a liability in tort, applicable law falls to be determined under the Private International Law (Miscellaneous Provisions) Act 1995, and the Claimants had a real prospect of establishing English law as the applicable law. Even if extra-territoriality were engaged, the Claimants would still have a real prospect of showing Parliament intended section 130 of the BSA to apply to foreign defendants, given the broad "just and equitable" test and the international nature of the construction industry.

Extension of time for service

The Court rejected the challenge to the extension of time for service against SBG in the Redrow claim. On full and frank disclosure, it found that the Claimants had no duty to draw attention to a limitation defence they genuinely regarded as hopeless and which the Defendants had not articulated. The "no good reason" challenge raised by the Defendants had effectively been conceded as part of a consent order.

Building on recent caselaw

This judgment builds on two other recent BSA related decisions. In Mulalley v Sto [2026] EWHC 1552 (TCC), the Court assessed for the first time quantification of a section 149 contribution claim, awarding an 87.5% contribution against the supplier of a defective cladding system. In BDW v URS [2025] UKSC 21, the Supreme Court confirmed developers may bring contribution claims without a prior judgment or settlement, and that BSA section 135 retrospective limitation extensions apply to dependent claims. Together, these decisions strengthen a developer's ability to recover remediation costs from cladding suppliers and their corporate groups.

Key points for the UK construction industry

• Section 149 BSA claims against cladding suppliers: Contribution claims can be pursued against manufacturers and suppliers alleged to be liable under section 149. The viability of such claims will be fact-specific.
• BLOs against foreign parents and associates: Section 130 BLOs can potentially reach foreign parent companies and holding entities. The Court endorsed the applicable law approach over extra-territoriality and indicated the broad "just and equitable" test is capable of extending to foreign associates.
• Contribution claims may be issued early: Developers need not wait until they have paid or been ordered to pay underlying remediation costs before issuing contribution proceedings, per BDW v URS.
• Developing jurisprudence: The Court is more likely to consider that novel BSA points should be determined at trial on actual findings of fact, not on summary applications.

HB (Wm) Ltd & Ors v Sto Ltd & Ors [2026] EWHC 1833 (TCC) (14 May 2026)

4. UK Government Publishes Response to Single Construction Regulator Consultation

The UK Government has published its response to the Single Construction Regulator ("SCR") Consultation which closed in March 2026. The establishment of a SCR was the first recommendation from the Grenfell Tower fire inquiry.

In its response to the SCR Consultation, the Government outlines that:

• It intends to proceed with the creation of the SCR, building upon the existing Building Safety Regulator, which will be the SCR's foundation;
• The SCR will form a single coherent system of the regulation of buildings, products and relevant professions; and
• It intends to legislate for the formation of the SCR as soon as parliamentary time allows, with the implementation of the new SCR starting from 2028.

Single construction regulator prospectus: government response - GOV.UK

5. Government Announces Series of Measures Improving the Proportionality of the Higher-Risk Buildings regime

The Government has outlined several measures affecting the building regulations regime in England, particularly in respect of proportionality in the Higher-Risk Buildings ("HRB") regime, including:

• Allowing the relaxation of building control approval for certain types of telecommunications related works (e.g. drilling of small holes for fibre optic cabling), and for the installation of mobile communication masts on HRBs (for Gateway 2 requirements only). These dispensations relate to the Government's consultation earlier in 2026 and came into effect on 1 September 2026.
• A response to its earlier consultation on the categorisation of HRB work indicating that the Government intends to proceed with the option excluding work inside residential units in HRBs from Category A works requiring building control approval, but will undertake further consultation on several points
• Launching a new consultation on the emergency repairs regime for HRBs including a proposal for expanding the scope of emergency work to introduce a new category for lesser "critical works." This consultation closed on 3 September 2026.

Directions under the Building Act 1984 for telecommunications related building work, Circular 02/2026 - GOV.UK

Proportionality in building control: categorisation of higher-risk building work - GOV.UK

Improving proportionality and building safety outcomes in building control: emergency repairs under the higher-risk building regime - GOV.UK

6. NEC Revises Option X29 Covering Nature, Biodiversity, and Climate Change

On 6 July 2026 the NEC issued a revision to Option X29, first issued in July 2022. The revision formally embeds nature and biodiversity alongside climate change in this secondary option clause. Clause X29 provides a contractual mechanism to incorporate the setting, measurement and incentivisation of environmental performance across a project lifespan. The 2026 revision incorporates specific measurable nature and climate requirements into the NEC contracts.

This update formally extends Option X29 beyond climate change to include and encompass biodiversity net gain, habitat connectivity, flood resilience, sustainable urban drainage, soil health, canopy cover and wider ecosystem outcomes.

NEC expands Option X29 to put nature alongside climate in a major industry milestone | NEC Contracts

7. Government Announces New Funding for Correction of Fire Safety Defects for Buildings under 11 Metres

The Ministry of Housing, Communities and Local Government has announced an extension of the existing Cladding Safety Scheme being delivered by Homes England to include buildings under 11 meters with serious fire safety risks. This extension of the funding shifts remediation prioritisation based solely on building height to one based on risk level.

Buildings under 11 meters: new funding - GOV.UK