Hardly a week goes by without London property owners looking to make the most of their property holdings, by extending horizontally (in outer London) or vertically, often downwards (in Central London). Unfortunately, too, hardly a week goes by without property owners falling out with their builders or architects because the building works are not going well, are weeks behind schedule, or have serious design flaws, or because the costs of the works are far higher than originally agreed.

Property owners will be in a far better position, financially, legally and emotionally if they have entered into proper, legally binding, written contracts with their builders and main professional advisers. Very large sums of money are at stake – and at worst property owners can be liable for prosecution if there are breaches of health and safety laws, or workmen, neighbours or passers-by are injured or killed as a result of the works. Recent examples of events which have occurred in London and which could be the property owner’s liability include:

– the collapse of a road in Central London due to faulty work excavating the basement of a house

– severe damage to an apartment block caused by water escaping from a top floor flat during building work

– injury caused to a passer-by when an external hoist went out of control and plunged to the pavement.

Property owners must make sure they are protected by getting appropriate contractual documents completed with their building contractor; architect or designer; engineering consultants, both for structural and services designs; quantity surveyor; and project manager or agent.

These documents do not have to be long or complicated, but they must set out what the builder or consultant is going to do, in proper detail; and when they are going to do it; how much and when they are going to be paid for the work; the timescale for the work; and the consequences if these timescales are not adhered to. The documents must also set out the standard of skill and care to be employed by the builder and consultant, the scope of and processes for the works and requirements for insurance.

Even though the fact that these documents have been signed makes it far less likely that claims will arise, it is sensible that they also contain some dispute resolution provisions. These documents are important and property owners, who will be investing substantial sums of money in such works, should have them negotiated and checked by specialist lawyers on their behalf. Ideally, contractual documents should be prepared by the property owner’s own lawyers, in preference to using the builder’s or consultants’ favoured documents – though if the works are relatively straightforward and/or their cost is reasonable, certain industry standard forms may be used.

The documents involved are likely to include a building contract; a letter of intent, allowing the contractor to start work without the contract being signed and do limited work until signature; the appointments of the consultants; collateral contracts, guarantees and bonds required by funders and/or giving additional protection to the owner; and insurance documentation.

For further information about construction contracts and issues related to residential and commercial construction projects and disputes, please speak to Nigel Brown and James Brand, Construction Law Consultants in Druces LLP’s Property team.

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