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Get contract in place for your refurbishment project

Tricia Morrison is Head of Construction at Napthens solicitors. Here she explains the key legal issues surrounding construction contracts when embarking on a refurbishment project.

If you are planning a refurbishment of your premises, forthcoming building works can be a source of considerable excitement. But often the desire to get cracking with the works can mean that the parties involved don’t take the pre-start step of putting into writing what they think they have agreed! This can be the cause of disharmony and cost during the course of the works. And the initial shine of excitement in getting the project started can quickly tarnish.

Regardless of whether you are just refurbishing the kitchen, or are adding a three floor extension to the back of your premises, it is likely that such works will be defined as a ‘construction contract’ within the meaning of the Housing Grants, Construction and Regeneration Act 1996 (the “Act”). The Act requires construction contracts to make certain provision in relation to payment and dispute resolution. If your construction contract is either silent or inadequate in its express provisions, the terms of the statutory Scheme to the Act will be implied into your construction contract. Construction contracts entered into prior to 1st October 2011 in England and Wales (1st November 2011 in Scotland) which were not in writing were not subject to the Act. Contracts entered into after these dates are subject to the Act, even if only verbal.

A lack of evidence in writing as to the arrangements made with your building contractor can leave you exposed to uncertainty and disputes about what was agreed, for example:

  • the scope and quality of works that you were expecting
  • the time for completion
  • the price and terms of payment
  • or a combination of all of those factors

This in turn could lead to you incurring time and costs in bringing or defending a claim. The terms of an oral or partly oral contract are likely to be particularly difficult and expensive to prove. The same will apply to any variations to works that you agree with your building contractor.

In respect of payment terms, the terms of the Act are intended to improve cash flow from you as the Employer, to the building contractor. The Act is often said to put in place a “pay now, argue later” mechanism. This may be a particular issue should you find yourself having to make a large interim payment to your building contractor which you dispute.

In order to avoid or limit any issues with your building contractor during the course of works or following completion of works, the golden rule is to always enter into a written contract, not only with your building contractor but other 3rd parties such as your architect. There are numerous standard form construction contracts on the market that cater for all different types, sizes and values of construction works. Expert advice should be taken in relation to the completion of the contract forms and whether any bespoke amendments should be made. You should find that taking this early step will reduce the risk of finding yourself in a dispute with your builder.

Putting your contract terms in writing should allow you to manage the contractual process so as to avoid many of the pitfalls, allowing you to focus on getting the building work done and look forward to enhancing your business.