When it all goes wrong! The value of having a building contract
For a lot of people carrying out a home building project it’s their biggest fear: it all goes wrong and the contractor wants more money, or refuses to work.
This leaves you open to potentially serious financial problems, having nowhere to live, and the enormous amount of stress that goes with it.
We therefore cannot stress enough the importance of getting a building contract in place before the works start.
Fortunately, in the UK, there are standard form building contracts that, even if you don’t get them drafted out and signed by both parties, can be applied to a building project, so long as you have a written agreement from your builder that the works will be carried out in accordance with that contract.
The most common, and for all intents and purposes, the only standard form building contract that you will need to turn to when carrying out a home build is the JCT Minor Works Building Contract (JCT MW).
The JCT MW contract has been drafted by experienced professionals, and covers all of the major areas in which problems occur during a building project. This includes, the process for managing variations and issuing instructions, payment procedure, the procedure for dealing with delays, and the methods for dealing with disputes in the event that one should arise.
In the event that a building project goes wrong, and the contractor is claiming that they are owed money, and you cannot negotiate the situation, then your first step should be to turn to the contract.
Before the works start, you should confirm in writing the following pieces of information:
• A priced schedule, with as much detail as possible
• A construction programme, including a date for completion
• The level of liquidated damages to be deducted in the event the completion date is not achieved
• A signed statement that the works will be carried out in accordance with the latest version of the JCT MW
Once the works start on site, it is important to keep track of any variations to the works. Any changes to the works should be agreed in writing, and be priced before they commence.
This is often where problems arise. The contractor believes he’s been given an instruction, usually a verbal instruction, and has proceeded with the works. The client then realises he is being charged considerably more than they anticipated, and a dispute arises. Therefore, if you have all variations and instructions priced and written down before they start, you avoid this issue. Yes, it takes a bit of paper work, but it can save an enormous amount of stress later on.
But what happens if the contractor is simply not performing? The completion date has come and gone, and there seems to be very little activity on site, and you can’t get hold of your builder for love nor money.
Firstly, if you have a liquidated damages sum agreed, then you can deduct this from any future payments to the contractor for any time over the agreed completion date, including if you have agreed to extend the completion date. Either way, if they contractor has not completed the works by the agreed completion date, extended or not, then you are entitled to deduct liquidated damages, if they have been agreed beforehand.
Bear in mind that deducting liquidated damages often upsets the contractor, so you should try other methods to resolve the lack of performance before deducting these. The best thing to do here is to advise the contractor in writing that if there is no marked improvement or progress made within 7 days, you will begin to apply liquidated damages back-dated to the completion date.
If you do not have a date for completion, or if the completion date has not yet been reached, and the contractor is not performing, then you can write to the contractor specifying that you have seen little of no works being undertaken on the site, and that if there is no action within 14 days from the date of the letter, you will be discharging them from the contract for frustrating the process, and that you will be appointing another contractor to complete the works.
In this event, you will need to quantify any monies owed to you, or to the contractor, and you will be liable to pay these if there is any work done which has not been paid for. However, the costs will need to be demonstrated by the contractor if he claims for them. For example, if he states that he has completed 5 linear metres of brick walling, you should ensure there is 5lm of brick walling completed. If the detail described in the contractor’s pricing is too vague, you should ask them to be more specific.
All in all, for the lay person, it can be a daunting prospect to manage this process with the contractor yourself. Again, if things are really nasty and you feel that you are in over your head with a large amount of the money riding on winning the dispute, it is highly recommended that you get professional advice from a quantity surveyor, a building surveyor or another suitably qualified person. Their fees will almost always be considerably less than the sum of money that stands to be expended should you lose your dispute with the contractor.
If you’re having a construction dispute and need advice about how to proceed, please contact us, or call us on 0208 242 4668.
Speak to a surveyor