Advice for property developers
Property development carries with it a unique bundle of risks and opportunities. It is, to a substantial extent, a game of risk management/mitigation.
The lawyers at CCS Legal are intimately familiar with the risks and traps associated with property development, and offer a suite of services to help property developers minimize risk and, where a risk eventuates, reduce the liability associated with that risk.
This is best accomplished by paying careful attention to the following matters before, during and after a build:
Risk to developers is best mitigated by setting up effective contractual arrangements with the builder before the commencement of work. There are a range of different contracting options for a developer to choose from that will increase or decrease the risk profile. CCS Legal can help with the legal aspects of the tendering process, with the selection of the right sort of building contract for a specific development, and then drafting and delivering that contract in a way that best preserves the developer’s rights.
A payment claim cannot be made under the SOPA unless there is an available reference date, being a date fixed by the contract, or the legislation, as a date for making payment claims. Unless the contract otherwise provides, only one claim can be made in any named month.
Once a payment claim has been submitted, the principal (or head contractor) has 10 business days to respond, unless the contract prescribes a shorter period. This response must be in writing and is called a ‘payment schedule’.
If the principal or head contractor fails to provide a payment schedule, within the required timeframe, it will be liable for the entire amount of the claim. The contractor can t hen recover this amount as a debt in court.
If the principal issues a payment schedule within time, but the contractor disagrees with the assessment, the claimant can make an ‘adjudication application’.
It is generally not sufficient to simply set up a good contract – building contracts tend to be living things that need to be administered correctly throughout the build in order to get maximum benefit from the terms. CCS Legal provides guidance to developers on the proper administration of contracts.
The adjudication application is a written document that must be sent to the nominating authority within a fixed period, typically 10 business days from the date the payment schedule is served upon the claimant. The exact timeframe will depend on the circumstances.
The response to an adjudication application must be made within 5 business days of receiving the application, or 2 business days after receiving notice of the adjudicator having accepted their appointment, whichever is longer. Both timeframes are exceptionally short.
A claimant has an express right to withdraw an adjudication application. The respondent may object to the withdrawal if an adjudicator has been appointed.
Most importantly, the respondent is not entitled to include in its adjudication response any reasons for withholding payment that were not included in its payment schedule.
Once the time for a response has lapsed, the adjudicator is required to determine the application. Typically, this is done by reference to the application and the response, with neither party having any right to appear before the adjudicator. It is not uncommon for the adjudicator to seek further submissions from the parties.
The adjudicator’s determination is required within 10 business days of the respondent’s submission. Brief extensions are not uncommon if approved by the parties. The adjudicator’s decision is easily registered as a judgment debt at court, and enforced as such.
The most common time for a dispute to arise is at or shortly after the completion of the build. Developers are at risk from the point of sale, as owners have the benefit of statutory warranties as against both the builder and the developer. As such, it is of critical importance that the developer ensure that the builder, as well as any design professionals, have complied with all of their contractual and statutory obligations. CCS Legal routinely advises developers in relation to disputes following completion, and has an excellent track record of good results for developer clients.
It is worth bearing in mind that prevention is the better part of cure. If, as a developer, you have entered into a good contract, and administered it effectively throughout the job, then the prospects of winding up in a dispute are slim, and if a dispute does eventuate the prospects of winning it are good. The most serious problems that we observe tend to arise where those preliminary matters (contracting and contract administration) have not been done well.