Rural Estates Newsletter February 2023 - Flipbook - Page 11
Where you choose to use a standard form contract, how can you get the best out
of them?
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Avoid mistakes: be careful filling in gaps in standard form contracts and choosing
optional clauses. At the risk of pointing out the obvious, correctly completing the
contracts is critical. Some of this information will be more obvious than others:
although the name of the contracting parties in a RIBA contract is a simple matter,
the application (or otherwise) of the Joint Fire Code in a JCT contract is a challenge
which many professionals struggle with. The selection and deselection of optional
clauses can also radically change the commercial effect of a contract. For example,
one of the insurance options in the standard form JCT contract requires the client to
ensure that all existing structures are insured in the joint names of the landowner and
the contractor. If this creates an inconsistency between the insurance stipulated by
the contract and the insurance arrangements actually put in place, the client may be
liable for the shortfall.
•
Arranging insurance: as above, it is important that the correct insurance policies
are put in place. One requirement which is often overlooked on residential schemes
is the New Homes Warranty. A New Homes Warranty is a form of insurance against
latent defects in the completed works, enabling a purchaser to recover the cost of
remediating defective works. Although a New Homes Warranty is not currently a
strict legal requirement, it may be necessary for a purchaser to have one before they
can obtain a mortgage. It is also expected to become a legal requirement within the
next few months.
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Regulatory matters: a recurring theme in recent legislation has been to impose
increasing legal duties on the construction client, not just the contractor, on the
(sometimes faulty) assumption that the client is in the best position to influence
outcomes. The Construction (Design and Management) Regulations 2015, for
example, impose health and safety obligations on all project participants, including
the client, and these are enforced by criminal prosecutions by the health and safety
executive. More recently, the Building Safety Act 2022 (BSA) has imposed a new
regulatory framework for the construction and maintenance of buildings. It imposes
duties not just on contractors, but also on their clients (as the new buildings’ owners)
to comply with the standards set out in the BSA. This means that clients can now
have claims brought against them directly if the building is not compliant. What this
means in practice is that, whilst it is all well and good for the contract to provide that
the contractor will comply with Building Regulations, it still might be worth the client
checking that someone has actually applied to the local authority for the
relevant approvals.
In summary, best practice in contracting depends on the size and nature of the project.
Whilst legally imperfect, standard form construction contracts are a reasonable solution
for certain smaller projects; they are a quick and efficient way of contracting on terms
which are generally functional. They will not, however, be appropriate for more complex
or valuable schemes. This applies in particular to bank funded projects, where the
additional expense of contracts advice (either to advise on and actively amend standard
documents, or to create fully bespoke ones) will be more justified.
Rural Estates Newsletter
February 2023
11