Building disputes have a habit of getting bad tempered quickly. After all, the necessary ingredients are often there: a homeowner who has invested a small fortune and expects the work to be completed to a top-notch standard, on time and costing as little as possible.
Meanwhile, the builder has often paid his subbies and suppliers as well as committing himself to other projects once this one is out the way. Add to the mix the inescapable feeling that the other party should not ‘get away with it’ and you can begin to see why a dispute can escalate.
How Might a Dispute Arise?
Let’s look at a worst-case scenario: a couple in Bournemouth who fell out with their builder over a bill of £13,500. Customer and builder ended up spending a combined £135,000 on legal fees, before the builder ‘won’ £5,000 in court, where the judge described the case as ‘horrific’.
At the Homebuilding & Renovating Show, a homeowner told me a similar tale: the builder had pulled off the site, leaving work unfinished, and had presented a bill for extras that he said needed to be paid before work could recommence.
Further pressure existed because the homeowner was in rented accommodation and, if they couldn’t move back into the house on time, would have to find new lodgings.
I couldn’t help but wonder: was the homeowner the victim of a ‘cowboy’ builder or was the builder the victim of a ‘difficult’ customer?
Exasperated by the situation, the homeowner asked me a simple question: “If I could go back to the start then how could I have done things differently to avoid this nightmare?” To answer that, let’s look at some of the key factors in this case.
The Importance of Contracts
They also had some emails but nothing that was particularly useful. One email from the builder informed the homeowner what he wanted paying for the job, but gave no indication as to how the price was arrived at. There was no mention of how long the job was to take either. No one had thought to describe the work properly.
It is rare to find a single document that sets out what the parties have signed up to. I like contracts, but then I am a solicitor. I like them as it speeds things up from my point of view, which keeps a client’s legal costs down if a dispute arises.
A contract should also make my advice more robust. Solicitors often say, ‘but on the other hand’, a reflection of the uncertainties of the contract as the picture is not always as clear as we would like it to be.
Creating a Clear Contract
Let me give you an example: let’s say there is an argument over whether an item of work was an ‘extra’ or was to be included in the price. The advice will depend on the detail. The price for the concrete foundations obviously includes the excavation of the ground, and you may be convinced that excavated material should be removed by the builder, ‘but on the other hand’ the builder may have informed you that this would be an extra and he would leave the spoil on site for landscaping to save you money.
How about that list of extras? The builder wants to charge extra for the lintels over the doorways he knocked through, but you cannot understand how the work would be done safely unless the builder was going to support the structure above it. But the builder says he assumed the wall was studwork and it did not need supporting; had the homeowner wanted lintels then they should have put them on the original plan.
And what about the time for completion of the work? Who will pay for the accommodation the homeowner has to find as the building work has run over?
The homeowner is left with a project that is incomplete and riddled with defects. There is no prospect of completion in sight and the cost to complete is more than the amount left to pay the builder. A contract is invaluable in minimising the risk of this happening.
How to Choose a Contract
There is no short answer to this question, but it is important to avoid blindly filling in the gaps to contracts that are said to fit all. Every building project is unique. That said, there are building contracts that come as a standard form, such as the JCT suite of contracts and the RIBA Domestic Building Contract.
These standard forms will cover the basics – cost, time and quality – but need to be used in conjunction with a good set of plans, a detailed specification and ideally a document that breaks the price down into the component parts.
With one of the standard forms in place, however, you are in a good position to tackle the following issues:
The standard forms work on the basis of a fixed price for a fixed amount of work. The contract means that the plans, specification and price breakdown become contract documents that define that work.
Any work that the builder says is extra will need to be considered in the light of the information referred to in the contract documents. The contract will also contain a mechanism by which the price for genuine extra work is valued.
Most standard forms will record the date the work can commence and the date by which it needs to be completed. In the event the builder runs over, there is usually a pre-agreed rate of ‘liquidated damages’, which is an estimate of the loss the homeowner is likely to suffer if the work is late.
If there is extra work then the completion date will be put back to reflect this, or at least the date from which liquidated damages apply. The contract should also set out a mechanism for how the extra time is calculated.
A robust contract will state that the work has to be carried out in a good and workmanlike manner in accordance with the contract documents (the specification is the likely place for a description of the standard and the type of work required).
Remember the problem with the softwood door linings? A robust specification will make it clear that the door linings needed to be in hardwood and may include a requirement to match the existing if that‘s what is needed.
Many of the standard forms also contain a mechanism for notifying the builder of defects and giving the builder an opportunity to put things right at his own cost.
How to Avoid Escalating Disputes
But what if there are disputes about the amount of the extras and delays to the project despite a standard form of contract being in place. Many of the standard forms are helpful when it comes to dispute resolution.
The JCT contract (and most other standard forms for that matter) requires the parties to consider whether the dispute is suitable for mediation. If that fails, then the contract contains a method of speedy alternative dispute resolution called adjudication.
In simple terms mediation involves two rooms, an independent mediator and confidentiality. Each party has a room and the mediator shuttles back and forth with the task of helping the parties come to a voluntary and binding settlement.
The process is confidential so you can say what you like without fear that someone will take a note and then tell the judge. I have acted as mediator on all kinds of building disputes and the overall impression I have formed is that the parties are often relieved that they can try and settle.
The earlier the mediation takes place the better, to avoid the mediator having to mediate over costs as well as the real issues. A skilled mediator and two parties willing to compromise will lead to a successful outcome.
This is a formal process of determination which takes 28 days from start to finish, including a meeting with the adjudicator if necessary. Adjudication is not a court proceeding, but the decision will be enforceable through the courts if necessary. Adjudicators are drawn from industry and include quantity surveyors, architects, engineers and lawyers.
Many of the adjudications I have acted in have come about as one of the parties wanted a speedy decision. However, a referral to adjudication can leave the other party feeling that the relationship has broken down, whereas the process of mediation lends itself to keeping the relationship going.
How to Avoid a Dispute
1. Have a contract and keep records
Clearly, a contract will help you. Remember also that communication via email and social media may end up in a trial bundle when someone is trying to get to the bottom of a dispute. Also keep a site diary, which records who is on site, an outline of what they were doing and other matters of interest.
2. Make sure the contract is specific to your project
Opt for a standard form of contract but do consider how you need to amend it to suit your own project and circumstances. It’s a good idea to get advice in the form most suited to your project, which will often come from your architect or other professional overseeing the project. You may also feel that you would benefit from the advice of a solicitor who specialises in construction law to give you that extra piece of mind.
3. If a problem arises, seek help as soon as possible
If you do find yourself in a situation like the one I’ve described here, I recommend you turn to a specialist construction solicitor as soon as possible. Early advice can pay dividends rather than letting matters get completely out of hand and turning to a solicitor only when the claim form lands through your letterbox.