Arbicon ADR Ltd
RICS

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Employing any builder is a risk, reducing that risk is important. There are a lot of cowboy builders out there; however such practice is encouraged by a total lack of contract management or mismanagement by the Client.

When investing in a property purchase, you get legal advice; engage in formal investigations and a formal contract of sale to protect your interests where significant sum being paid out. So, why do people engage a builder for a similar significant sum without any professional advice, formal investigation or formal contract?

Professional advice and assistance from a specialist such as Arbicon on a building contract is basic, essential and part of the construction cost plan it should not be dismissed or else risk total disaster. Cowboy builders exist due to people making the fatal error of leaving this formality out. Our guidance and tips demonstrate by example that any negotiations that involve a cup of tea, handshake and the back of a fag packet, are a long way from what is required.

10 TOP TIPS

Arbicon can ensure that:

(1). The builder is screened for identity, creditworthiness and reputation before you start. Who is the builder legally? Does he exist? What assets does the builder have and what trading record does he have? What is his credit rating? Is the builder insolvent or at risk of it? What work has he done before and for who? Do you need a personal guarantee from the director of the firm? There must be security to sue the builder if you need to make a claim against them. Arbicon will assess whether the builder gets past first base.

(2). An effective detailed CONTRACT is drawn up before you start. Has the Price, time to do the work, design and scope of work to be done been fully defined and detailed? Does the contract suit the project? Have essential terms been incorporated to keep in control of the work as set out below? Arbicon can draw up the contract.

(3). Payment terms must be defined to pay for what is done. NEVER pay up front for anything or be dictated to on payment. The builder gets his guarantees of payment and rights through the contract where how and when payment is made. Advance payments encourage the Cowboy to run off with the booty to Spain never to be seen again. Do not pay for anything up front. Pre-agreed interim sums should be avoided and interim values ascertained on the work done only. Again, all valued by the Arbicon professional.

(4). Quality control by professional monitoring of the work. Rubble buried where it shouldn't be? Plastering over evil? Uncertified Electrical and Gas work? Wrong materials and products not fit for purpose? Essential bits missing leading to collapse and cracking? Cheap tricks, cover ups and shortfalls in products and workmanship will not happen if 2 Arbicon are employed. Such problems will be easily identified by the professional and de alt with through the rectifying powers in the contract and by legally reducing payment.

(5). The work is properly completed and handed over on time. Is there a start date, contract period, programme and completion date agreed in the contract? Is there a liquidated damages clause in the contract to charge the builder for late completion? Every day that the project overruns a charge is imposed on the builder. (Unless it is not his fault!) The contract should also define what is meant by completion.

(6). A defects correction procedure and retention clause is incorporated into the contract. The work is complete and the building in use, there are defect problems but the builder will not fix them, what do you do? Incorporate into the contract a defects correction procedure and a retention clause, retaining a portion (normally 5%) of the total sum due to the builder. A defects period is stated as say 6 or 12 months in which the builder has to rectify defects and the retention can be held interest free. The defects procedure should also include the power to employ others at the builder's expense on failure after 7 days to rectify defects.

(7). Design insurance and guarantees are obtained. If you have a mortgage lender these are likely to be imposed on you in any event, but again the contract can impose this requirement as a condition to completion. If major problems later occur the blame will be levelled at the designer or the builder, covering both aspects with insurance and guarantees can help rectify the problems.

(8). Termination/ Repudiation/ Suspension of Works are legally administered if necessary. If the builder does not perform or progress the works properly and diligently, walks off site, does not turn up or work is required to be stopped. A properly drawn up contract clause i s required so as to dispense with the builder, supplement the works and employ others at the builder's expense. Damages can be recovered and prevented effectively should everything go wrong.

(9). An effective adjudication procedure is available should disputes arise. If your claim against Mr Cowboy is greater than £10,000, with no ADR clause such as adjudication in the contract, your only option is Court. Does the Mr Cowboy have the money? Court is suicide if Mr Cowboy has no money as you will go through the mill for a long time spend a fortune on legal costs that are likely to be unrecoverable and at the end of it Mr Cowboy cannot pay you if you win. Added to this there will be prolonged agony for your nerves, detriment to your health, wallet and personal life that can last for months and years. The prospect t of such a personal and commercial nightmare is not an option. Arbicon's speciality is to cut this short effectively by being experts in adjudication, ADR and construction dispute resolution. The right to adjudicate in a contract will avoid expensive, prolonged and un-commercial Court proceedings. Adjudication provides a legally binding solution to all problems in a matter of days at low cost.

(10). The formality of using a third party professional stops cowboy behaviour! Using a third-party professional instantly makes the builder take matters seriously. Negotiations, directions and control all become easier and more effective. Arbicon's greater degree of contract knowledge and awareness of the pitfalls will steer the contract in a straight line. The tangible saving may not be apparent, but when the building work is incomplete, defective, overpaid for, constant promises made with no action or attendance on site or worse run off with all your money to Spain you will wish you had listened…


Author: Jonathan Nugent

Managing Director - Arbicon ADR Ltd, Chartered Quantity Surveyor, Construction Adjudicator, Arbitrator, Mediator, Expert Witness/Reports/Determination, Lecturer, Delay and Loss Analyst, Leading Authority on Construction Contracts/Law, Commercial Construction Contract Solutions and Dispute Resolution.