From Financial Caps to Court Cases: What Every Subcontractor Needs to Know About Letters of Intent

In episode 137 of The Subcontractors Blueprint, Jacob Austin of QS.Zone breaks down the real risks of letters of intent (LOIs) for subcontractors. He explains how financial caps embedded in LOIs can leave subcontractors unable to recover costs already incurred — a situation courts consistently uphold. Jacob outlines the common trap of continuing work past the cap while waiting for a formal contract that never arrives. He provides practical safeguards, including stopping work at 80% of the cap, documenting all correspondence, and consistently pushing for a formal subcontract. His core message: understand what you're signing before starting work. KEY TAKEAWAYS: The UK government has announced a ban on retention payments in construction contracts, marking a major shift for the industry. New legislation will also cap payment terms at 60 days, mandate statutory interest on late payments, and empower the Small Business Commissioner to fine persistent offenders. Specialist contractor trade bodies have welcomed the changes, while some client groups warn of potential quality risks. Main contractors may adapt by backloading payment schedules and tightening quality controls instead of using retentions. Subcontractors are advised to strengthen their commercial practices, keep thorough records, and understand their contracts to protect their cash flow. The host emphasises that while the rules are changing, the commercial culture may not, so preparation is key. BEST MOMENTS: *   Letters of Intent (LOIs) are not formal contracts but can create legally binding obligations. Their meaning varies, so they must be read carefully to understand the terms. *   The single biggest risk is the financial cap. Courts consistently enforce this limit, meaning any costs incurred beyond it are often unrecoverable by the subcontractor. *   Subcontractors should never assume a formal contract will automatically follow. Main contractors may have no incentive to finalise one if the LOI suits their purposes. *   When approaching the financial cap, you must stop work and get written authority and, either an increased cap or the formal subcontract, before committing to further costs. *   Always push for the formal contract in writing from day one. This creates a paper trail and puts pressure on the main contractor to finalise the agreement. HOST BIO: Meet Jacob Austin, a Chartered Quantity Surveyor with a rich background at construction industry giants Balfour Beatty, Kier, and Vistry Group. With extensive involvement in education, health, and residential projects spanning various scales, from £1000s to over £100M in concurrent developments, Jacob brings a unique perspective. Having collaborated with numerous small businesses, he's now committed to sharing his expertise to drive their success. Join Jacob on his podcast, where he blends his profound insights and personable approach to offer guidance, industry secrets, and inspirational stories. LinkedIn - www.linkedin.com/in/jacob-austin/ Instagram - www.instagram.com/qs.zone/ www.qs.zone/all-links