Residential building project disputes and how to avoid them
The litigation department at Wilson Browne recently undertook a credit search of a small building company as part of due diligence within one of many building disputes for which we are instructed, and the information provided included that in excess of 70% of small building companies (including the defendant in this particular case) have a tangible net worth of less than £20,000.00. Our client, whose claim exceeds £100,000.00, would much rather have had that information before deciding to employ these builders. Luckily litigation remains an unfortunate but fairly rare occurrence, but it is vitally important to undertake due diligence before a project starts, and to employ expert litigation solicitors if a dispute develops.
What can you do to try and ensure your project proceeds smoothly so that litigation is avoided?
1. Know what you want your builders to do
Ensure that in anything other than small projects you have a detailed specification, planning drawings and working/building regulations drawings in advance of obtaining quotes from builders. If you do not have the experience and skill to understand these documents consider employing an expert surveyor/architect to advise at an early stage and to put together tender/contract documents.
2. Choose a solvent and competent builder
Look at examples of the work already undertaken by any builders you might consider employing, and ask for the details of previous clients who have agreed that you might contact them. A good builder will be delighted to provide this information. Do not assume that paid membership of a trade association guarantees either solvency or good workmanship.
Consider undertaking a credit search (for instance Dunn & Bradstreet) to identify the builders’ financial stability, if a company to check compliance with their public filing obligations, and whether they have recently had any Court Judgments against them.
If a builder becomes insolvent or you fall out with them in the middle of a project the costs of having the work completed by new builders will invariably hugely exceed the remaining part of the budget. No-one likes finishing off someone else’s mess. Ensure that the builder you employ is going to be in business throughout the currency of the project, and crucially has the financial means to pay to undertake remedial work, or to pay a Court Judgment and costs and damages if things go badly wrong.
3. Have a clear contract drawn up
This is probably the most important step that you can take to ensure that both you and your builder understand the rights and obligations involved in the contract. Consider purchasing a JCT residential building contract, either one for a homeowner who has appointed a consultant, or for a homeowner who has not. The contract is written in clear language, and has sections for all of the individual areas of the contract that you need to consider, including specification and plans, methodology for the works and details of scheduled payments. Good communication and a clear contract are the most obvious ways to ensure that both the builder and the homeowner move forward with a good understanding of what is going to be involved in the project, at what cost and within what period the works must be concluded.
4. In more significant projects consider purchasing structural/building defect insurance
The cost of this may be significant but will provide you with some protection should things go wrong. It may be that you can negotiate payment of the insurance by your builder.
5. Consider appointing a consultant to project manage
You will have the peace of mind of ensuring work is undertaken properly, in having individual staged payments certified, and if things do go wrong an expert on hand to resolve difficulties.
6. Make sure that you do not fall foul of the legislation surrounding party walls, building regulations and planning
Obtain expert advice on these issues at an early stage. The obligation to ensure that works are completed in accordance with building regulations rests with the homeowner, it is you who will have difficulty selling or mortgaging your property, so ensure that you are familiar with your obligations and do not assume that the builder is necessarily up to date with every single aspect of regulations. Ensure particularly that your builder has the relevant certification relating to works involving electrical systems and plumbing and gas.
In relation to party walls and planning, do not assume that your builder knows the law, and never accept your builder’s opinion that a Party Wall Notice is not needed. Party walls are not just walls that are shared and standing on a boundary, they can include garden walls, vertical or horizontal structures and floors and ceilings between apartments. You may need to serve a Party Wall Act Notice on your neighbours even if the works undertaken by you are six metres away from the boundary. If you have any doubt as to your obligations obtain expert advice from a surveyor with specific expertise in the Party Wall Act, membership of the Pyramus and Thisbe Club is normally proof of this.