Coronavirus, construction and ‘force majeure’
Stefan discussed the effect of COVID-19 on construction documents and his thoughts on the current market position for those using such provisions, the current guidance from the Construction Leadership Council (CLC), and effect of Brexit in relation to Joint Contracts Tribunal (JCT) contracts.
Stefan said: “Is COVID-19 going to be a relevant event for the purposes of a JCT? the answer is almost certainly yes. The most likely route for a contractor to take to establish that entitlement is to try and show that COVID-19 is force majeure for the purposes of a JCT contract.
It’s worth noting that force majeure in a JCT contract is not a defined term, which means is we are left to rely on custom and practice and the position that’s implied by deciding cases to work out what it means. The good news for contractors is that cases tend to indicate that things like pandemics are force majeure so it seems likely a contractor would succeed on that footing. If they put forward that argument, they are likely to receive an extension of time (EOT) and relief from Liquidated and Ascertained Damages (LADs).”
He added that Brexit would not be considered a force majeure event in the same way and is instead a contractor’s risk.
Stefan said: “Clearly there have been lots of changes to legislation in relation to Brexit. However, our view is that it will be quite difficult for a contractor to show that the changes up to this point could be linked to a delay to a construction project in a way that is sufficiently robust for a contractor to put that argument forward.”
He also provided details of the advantages and disadvantages of Project Bank Accounts (PDAs) in these uncertain times, adding: “These can make payments more secure as those in the supply chain can be assured they are going to get paid from an account jointly held by the employer and the contractor. The speed of payments and cash flow management is also improved which many businesses appreciate, and a more intangible benefit is improved project focus. We see it regularly in dispute that they take up a lot of time and management resource, so if a supply chain member is having to spend less time recovering money they are due and can focus on a project they are bound to be able to deliver better project outcomes.
There aren’t many disadvantages – there are some set-up costs and some contractors have complained about a loss of working capital, but besides those considerations PDAs are something a lot of projects should be considering.”
Planning complexities and the Planning White Paper
Tom updated the audience on a large number of key planning changes and consultations ongoing at present, including changes to the Use Classes Order (which came into effect 1 September) and the new Permitted Development Rights (including rights of demolition and adding extra storeys to buildings).
Tom spoke of the complexities of Permitted Development, with the original General Permitted Development Order 2015 being heavily amended since its introduction. saying: “This is very complicated and difficult to navigate, you need to spend time looking at the detail. There is now 22 parts to the Order, some with an alphabet of classes between them, and subtle differences in phrasing – it can feel as though it is trying to catch you out.
My overwhelming message to you is if you think you would like to take advantage of permitted development check it very carefully.”
Tom also spoke about the recent Planning White Paper, which places a heavy emphasis on housebuilding in particular.
He said: “A point to note about this White Paper is that lots of it is essentially a Green Paper. There are almost aspirational statements with not a lot of detail about how this may work. It is true that the planning system is complex, but it is inevitably going to be complex when it covers so many things.
To overhaul this process, five proposals have been made in the White Paper: streamlining the planning process, a digital-first approach, a new focus on design and sustainability, making improvements to infrastructure delivery, and ensuring more land is available for the homes communities need.”
Tom explained the structure of the White Paper and gave his insights as to what might work, and the reasons why much of it will not have the desired effect.
The Planning White Paper is open for consultation until 11:45pm, 29 October 2020 and can be found on the Government website.
If you are interested in hearing our experts discuss these issues, followed by a question and answer session with input from the audience, you can watch the full webinar on YouTube.
If you any queries on any of these topics or would like to know more, please contact our Housebuilder team.
Birketts’ upcoming webinars can be found on our Events pages.
Our next Housebuilder seminar will be held in March 2021. To register your interest for this and other Birketts’ events, please register you interest.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at October 2020.