Every Contract a Construction Company Needs in the UK (2026)

Last updated: February 2025

Legal Requirements for a Construction Company

UK construction companies operate under one of the most regulated contractual frameworks. The Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local Democracy, Economic Development and Construction Act 2009) provides statutory payment and adjudication rights. The Construction (Design and Management) Regulations 2015 impose health and safety duties. The Building Safety Act 2022 introduces new liability provisions. HMRC's Construction Industry Scheme (CIS) requires tax deductions from subcontractor payments. The Building Regulations 2010 govern technical standards.

Essential Contracts

JCT or NEC Construction Contract

Industry-standard contract suites — JCT (Joint Contracts Tribunal) for traditional procurement or NEC (New Engineering Contract) for collaborative projects, compliant with the Housing Grants Act 1996

Subcontractor Agreement

Must comply with the Housing Grants Act 1996 payment provisions and CIS tax deduction requirements — use JCT SBCSub or NEC subcontract forms

CDM Compliance Documentation

Documents duties under the Construction (Design and Management) Regulations 2015 for clients, principal designers, principal contractors, and workers

CIS Registration and Verification Records

HMRC CIS registration documentation and subcontractor verification records — failure to operate CIS correctly results in penalties

Professional Indemnity and Public Liability Insurance

Construction contracts almost universally require evidence of insurance — levels and types must be documented and maintained

Recommended Contracts

Collateral Warranty

Third-party rights document allowing funders, purchasers, and tenants to make claims directly against the contractor for defective work

Performance Bond

Guarantees project completion — typically required by clients for projects over a certain value, provided by a surety company

Retention Bond

Alternative to cash retention, allowing the contractor to receive full payment while providing the client with security for defects

Common Legal Risks for a Construction Company

  • Payment disputes without compliant payment notices and pay less notices under the Housing Grants Act 1996
  • Adjudication referrals for failure to make interim payments within the statutory timescales
  • HSE prosecution under CDM 2015 for health and safety failures on construction sites
  • Extended liability for defects under the Building Safety Act 2022 (up to 30 years for dwellings)
  • HMRC penalties for CIS non-compliance including incorrect deductions or late filing

Industry-Specific Notes

The choice between JCT and NEC contracts depends on the procurement route and project type. JCT is more traditional and widely used in the private sector; NEC is preferred for public sector and collaborative projects. The Building Safety Act 2022 has significantly extended limitation periods for claims related to dwellings. All construction contracts over £0 are subject to the statutory adjudication and payment provisions of the Housing Grants Act 1996 (as amended).

FAQ

What is statutory adjudication and does it apply to all construction contracts?

Under the Housing Grants, Construction and Regeneration Act 1996 (as amended), any party to a construction contract has the right to refer a dispute to adjudication at any time. The adjudicator must reach a decision within 28 days (extendable to 42 days with the referring party's consent). The decision is binding on an interim basis and must be complied with even if a party intends to challenge it in court or arbitration later. This applies to virtually all construction contracts, whether written or oral.

How do the CIS (Construction Industry Scheme) rules affect construction contracts?

Under CIS, contractors must deduct tax from payments to subcontractors (20% for registered subcontractors, 30% for unregistered) unless the subcontractor has gross payment status. Contractors must verify subcontractors with HMRC before first payment, make deductions, file monthly CIS returns, and provide deduction statements. CIS applies to construction operations including building, alterations, repairs, and demolition. Failure to operate CIS correctly results in penalties and the contractor becoming liable for the tax that should have been deducted.

What has the Building Safety Act 2022 changed for construction company liability?

The Building Safety Act 2022 has retrospectively extended the limitation period for claims under the Defective Premises Act 1972 from 6 years to 30 years for existing buildings and 15 years for new buildings. It has also introduced a new cause of action for buildings that are unfit for habitation. This means construction companies face significantly longer exposure to defect claims for residential projects. Professional indemnity insurance and proper contract documentation have never been more important.

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This is guidance, not legal advice. Consult a solicitor for complex matters.

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