What is a retention sum in a contract for?
This is an allowance (typically 5% of overall certified value) that the employer retains until practical completion. It is there to encourage the contractor to make good any defects, or if they fail to do so it is a sum to allow the works to be remedied by someone else.
Do I need a contract administrator?
If you use one of the JCT contracts, then you will need to appoint an independent contract administrator to oversee it, and issue instructions, certificates etc. and mediate between employer and contractor.
Can I pay cash to the builders and avoid VAT?
Tax evasion is not something that we recommend and we suggest you don’t enter into an agreement with a contractor on this basis.
My builder is not charging VAT, is he behaving illegally?
Not necessarily, if a builder’s turnover is under a certain threshold he is not liable to pay the VAT.
Should I live in the property during the works?
Building works are inherently messy and disruptive and if possible we would advise you to live elsewhere for the duration of the works. It may cost you more, but you will be much healthier and saner for it!
On localised work sometimes it is possible to separate the working area, even set up a temporary kitchen. On these works programming and protection need to be discussed at tender stage.
Do builders provide guarantees for the work?
No, not generally. They are liable under common law for a period after the works are completed, although this is dependant on the problem that arises. There are some insurance companies that offer insurance for completed building works, This can be worthwhile especially on new buildings.
How does one guarantee they will complete on time?
There is no guarantee the works will complete on time. Even with the best will in the world and an experienced contractor, building work is complicated and subject to inherent risk and often takes longer than planned. You should aim to minimise this risk and build in contingencies if the contract over runs. There are also LADs (see below), which can compensate you for a delay to a project in certain circumstances.
What is the potential risk associated with delivery from a supplier, which forms a large part of the contract e.g. Glazing Manufacturer.
The risk is usually one of delay and additional costs
Do you project manage the works whilst on site?
As contract administrators we attend site on a regular basis, typically every month or two weeks. We will check the works, ensure they are building to the drawings and specification and report on their progress against a program. We will issue a certificate for payment and answer any queries. We are not there to project manage the builders on a daily basis – ultimately it is their duty to manage themselves.
Once the works start who has responsibility for security and safety on the site?
Under contract the builder has legal responsibility for the site and his insurance must be in place.
Can I speak to and instruct the builders directly once on site?
You are the employer so you can speak to your builder on site. We recommend you do not issue any instructions directly to the builder as there may be cost and time implications to the contract that are not immediately apparent.
It is always better to have one point of contact – normally the Architect – and instructions to come from him / her only.
If I issue instructions to revise parts of the project, will this affect the completion date and or costs?
Any deviation has a potential knock on effect. It does depend on the instruction and the point in the contract. Generally if the item is minor or issued early on in the program, then the builder can adjust his work schedule and complete within the specified contract period.
Will there be any more unexpected extras?
By the very nature of being unexpected, we can never predict what the future will bring. We can however advise on the potential risks and likely costs associated with your building project and help you to manage any risks and how to react when the unexpected happens. We advise taking more time to plan a project in the initial stages, as this will reduce the overall risk of unexpected extras.
Can I start work before we have planning consent?
Yes, but we advise not entering into a contract with a builder until all consents are in place, as there is a risk of delay to the project and additional costs may be incurred. On larger projects there may be work not affected by planning that could start.
If the project goes beyond the original completion date what costs may I incur?
If you are on a fixed contract, then in theory the overall costs should not change.
There may however be extra preliminaries costs (this is the cost of setting up and maintaining the site) passed onto you if the contract has been extended by a relevant event and awarded as such by the contract administrator . You would also need to budget for extra professional fees and storage costs.
What are LADs? (liquidated ascertained damages)
Inserted into a contract is a sum, that is agreed in advance, that should compensate you for any financial loss if the project over runs. At the employer’s discretion, these can be deducted from the contract. They are to cover extra professional fees, or rental of a property, or loss of income. They should not be viewed as a penalty clause.
What is practical completion?
This is in essence the point at which the works are fit for its practical purpose. Fit for purpose does not mean complete in every detail, nor all imperfections are put right. The key point is this is the point at which the insurance and ownership of the site reverts to the owner, and the defects period commences. Final payment of all money is made to the contractor less allowances know as ‘retention’, which is typically 2.5% of the contract sum.
Can I move back in before the works are complete?
In an ideal situation you should wait until after practical completion, however if the builder is allowed to work unimpeded or you understand the potential delay to the project by you doing so, then occupation of part of the works can often be agreed with the builder. However ownership of the site will remain with the contractor until practical completion.
We discover a building defect after the builder has left, what can we do?
In practice most builders will return to make good if it is a hidden (patent) defect that has come to light, but you should not expect them to return to make good general wear and tear on the building. The builder has a duty of care beyond the building contract on workmanship.
