RBH Building Contractors v James: residential occupier exception and payless notices clarified by Court of Appeal

The Court of Appeal has dismissed RBH Building Contractors Limited's appeal in RBH Building Contractors Limited v Ashley James & Anor [2026] EWCA Civ 511, delivering important clarification on two frequently contested areas of construction adjudication law: the residential occupier exception under s.106 of the Housing Grants, Construction and Regeneration Act 1996, and the requirements for a valid payless notice under s.111.

The dispute arose from an oral construction management contract for a large luxury house in North Devon, entered into in January 2022. RBH served a payment notice in November 2024 for £663,016.16 — a sum that had apparently never been previously invoiced — giving the respondents just 17 days to respond. Mr and Mrs James issued a payless notice disputing the entirety of the claim. The adjudicator found against them on the payless notice point and awarded RBH the sum claimed in full. The High Court declined to enforce that award, and RBH appealed on both issues.

The residential occupier exception

Lord Justice Coulson, giving the leading judgement, laid down a structured set of principles for determining whether a party "intends to occupy" a property as their residence within the meaning of s.106. The test has two elements: a genuine, bona fide subjective intention to occupy; and a realistic — rather than fanciful — prospect of bringing that occupation about. The determination is made by reference to the position at the time of contract formation, though evidence from before and after that date remains relevant.

Critically, the Court rejected RBH's argument that the terms of a development loan — which contained undertakings that the property would not be used as a dwelling — were a "trump card" capable of overriding all other evidence. Such documentation forms part of the evidential picture but carries no automatic priority. The Court also declined to extend the reasoning in Howsons Limited v Redfearn [2019] to a breach of a private loan agreement: unlike a breach of planning permission, which carries public law consequences and potential criminal liability, non-compliance with a lender's contractual terms is a private civil matter.

The respondents' plan to let the property via Airbnb for roughly 13 weeks per year was similarly held not to defeat the exception. An owner who otherwise occupies a property as their only home does not lose the protection of s.106 merely by renting it out for a quarter of the year.

The payless notice

The Court upheld the validity of the payless notice — an 11-bullet-point letter disputing specific items in RBH's payment application, concluding that nothing was owed. Lord Justice Coulson reaffirmed the established standard: a payless notice must make it "tolerably clear" what is being withheld and why, judged from the perspective of a reasonable recipient with knowledge of the payment notice to which it responds.

The judgement offers a pointed observation about context. RBH's own payment application was characterised as a "smash and grab" claim — a bulky spreadsheet of 527 line items, much of it vaguely described, served without warning and with a very short payment window. The respondents had done considerable analytical work in producing their response within that timeframe. It was not open to RBH to complain that the payless notice required them to cross-reference their own spreadsheet to understand the dispute.

The Court also confirmed that a payless notice need not contain an explicit arithmetical calculation, nor is a figure of £0 insufficient simply because the payer has not separately stated the gross sum in dispute. Provided the notice gives an adequate agenda for adjudication, it will ordinarily suffice.

The appeal was dismissed unanimously.