There have already been many changes in the construction industry with the implementation of the BSA 2022 and secondary legislation, and an increased focus on consumer rights with the new consumer duty that businesses need to get to grips with. This act is no exception to the drive for consumer rights.  The Act is designed to make it easier for leaseholders to deal with their own properties and challenge behaviours by landlords and their agents that they consider to be unreasonable. This is more legislation about which property managers need to be aware and understand what it means for their own businesses and their obligations to their clients. 

The Act extends the standard lease extension term from 90 years to 990 years for both flats and houses and reduces ground rents to a peppercorn.  It also removes the requirement for leaseholders to have owned their property for two years before they can seek to enfranchise or extend their lease.

RICS has issued its response and has confirmed that it "welcomes" this Act, and believes it will "provide clarity to leaseholders, landlords and the market".  RICS has also stated it will be paramount for a focus to be placed on regulation in the profession to ensure standards are upheld and consumers are protected. 

What are the likely key impacts?

The Act gives leaseholders the rights to take over the management of their property and/or to appoint their own property manager. Previously, if 25% of a building's floor space comprised commercial property, a leaseholder would be barred from taking over the management of that property. This limit has now been increased to 50%, thereby increasing the number of leaseholders that are able to take over their property management or appoint their own managing agent. 

This is likely to increase the number of leaseholders deciding to manage their own properties.  For existing property managers, this could result in a change of management and/or an increase in the number of parties dealing with properties, thereby increasing costs. 

For those leaseholders wanting to enfranchise, they will no longer have to wait two years from the date of purchase to take this step (or to extend their lease).  The Act also requires each party to pay their own costs of any enfranchisement, changing the position that it was always the leaseholder who had to pay the freeholder's costs. Property managers need to factor in this change and to advise freeholders about the impact of a request to enfranchise.  

The Act also introduces new requirements for freeholders and property managers to give greater transparency regarding service charges.  All leaseholders are now entitled to receive minimum key financial and non-financial information and freeholders/their agents must provide a standardised service charge demand form and an annual report, so that leaseholders can better scrutinise costs and challenge them, if appropriate. Allied to this, there will no longer be a presumption that leaseholders will pay the freeholder's legal fees in disputes where the leaseholders challenge practices or charges. This will need to be factored into any dealings with leaseholders where charges are subject to a challenge.

The Act also bans managing agents from taking a commission on arranging buildings insurance, imposing a new scheme of transparent administration fees.  Property managers will need to ensure they have appropriate costing structures in place for undertaking the task of arranging or renewing insurance.

Key points to note

• Transparency is key – leaseholders need to be made aware of all charges and costs, in a standard format that can be scrutinised. 
• Excessive costs will likely be challenged – make sure your practices and charges can be justified in the event of a challenge.
• Keep up to date – be aware of what new regulations will mean for your business and operational costs and stay up to date with future developments. 
• Take legal advice – if you are unsure of your obligations, seek legal advice to make sure you are compliant.

For further information on any of the issues raised in this article, please contact Alex Anderson. 

After remaining relatively unchanged for 2023, RICS is reviewing its Minimum Policy Wording.  This comes due to "changing market conditions" and "an increased capacity within the market to write PII".  The proposed changes are aimed at protecting consumers and assisting firms in managing their liabilities.

As we have previously reported, it has been challenging for surveyors to obtain suitable insurance cover due to policy limitations and an increase in the cost of premiums.  RICS recognises this is in no small part due to well-documented fire safety incidents and exclusions for those with fire safety exposure.  Uncertainty in the market has also affected valuation firms.  However, it appears insurers have increased their surveyors PII books and have a new enthusiasm to write fire safety cover.  

Proposed changes

The consultation seeks views on changes to RICS' Minimum Policy Wording in respect of existing PII.  RICS has identified the following issues and propose three amendments:  

1. Fire safety exclusion

At present, the RICS Minimum Policy Wording (UK and Ireland) does not contain an exclusion for any form of Fire Safety.  RICS's Listed Insurer Agreement deals with Fire Safety.  Fire Safety exclusions were permitted from 1 April 2020 when RICS allowed a blanket dispensation following consultation with insurers.  RICS changed its stance in 2021 for buildings of four storeys or less.  Following engagement with insurers, it was not thought to be appropriate to remove the fire safety exclusion last year due to the Building Safety Act and the Defective Premises Act.  However, with insurers' increased understanding of exposure to these risks, RICS considers it time to revise the terms of its standard exclusions, whilst not removing them completely.  RICS therefore proposes a requirement for insurers to provide coverage for fire safety claims on buildings between 11 – 18 metres high based on:

• A negligent act, negligence error or negligent omission; and 
• Applicable to Professional Services undertaken on such building on or after 1 April 2024.
• Coverage for fire safety claims on buildings of 11 metres or less will remain unaffected.  

2. External Wall Assessments

As well as fire safety exclusions, RICS has also allowed insurers in the UK to exclude cover for surveyors completing EWS1 forms.  Since RICS published its guidance note in November 2022, lenders are requesting fewer EWS1 forms.  Developments since its guidance, including PAS9980, has led RICS to review and update its position.     

RICS proposes that the exclusion of cover for EWS1 forms in the UK, currently narrowly defined within 19.1 of the Professional Business within the Minimum Policy Wording which excluded Professional Business unless declared to insurers, should now be amended as follows:

• Delete the sentence “other than the completion of the EWS 1 (or as revised) unless specifically declared to, and agreed by, INSURERS” and revert to the definition of PROFESSIONAL BUSINESS in use prior to 01 April 2020, namely:

• “PROFESSIONAL BUSINESS shall mean: 19.1 “those services (including the giving of advice) provided to a third party, which are undertaken by members of the Royal Institution of Chartered Surveyors (or have otherwise been declared to INSURERS) and which are performed by or on behalf of the PRACTICE within the TERRITORIAL LIMITS”. And to instead clarify within the minimum policy wording that EWS1 and FRAEW should be covered for buildings up to 11 metres. For buildings between 11 and 18 metres, insurers may exclude EWS1 and FRAEW unless undertaken by, or signed off by, a successful completer of the RICS training programme (a Level 6, Ofqual accredited qualification).  

3. Cyber

In 2021, RICS incorporated a clause in its Minimum Policy Wording to allow for exclusions due to losses, costs or expenses resulting from a "cyber act".  This included investigations, containment/stopping it, remedy issues caused by it and compliance with notification obligations.  RICS proposes amending the cyber clause in accordance with the International Underwriting Association's model clause used by underwriters for other professional services policies.  Therefore RICS proposes deleting the following:

• Definition 6 Computer System;  
• Definition 8 Cyber Act; and 
• Exclusion 7 Cyber Act

The consultation in the UK and Ireland is open until 31 December 2023. 

The amendments will take effect on 1 April 2024.

Comment 

Act now by reviewing the consultation document here and completing the PII market consultation here.

For our previous article see: RICS PII market consultation – Is the feeling mutual? Have your say.

The consultation is a response to feedback gathered by RICS in its last Residential Market Survey, which indicated that energy efficient homes are more desirable and valuable.  Retrofitting existing housing stock with energy efficient measures (EEMs) is a key part of reaching the Government's net-zero target and the publication of a new Standard aimed specifically at this issue reflects the profession's vital role in reaching this goal and the scope of the task ahead. According to RICS, an estimated 25 million homes in the UK will require some form of energy improvement work.  The move is particularly well-timed as the demand for retrofit advice is increasing in light of high energy prices.

RICS' consultation on the new standard is open until 12 September 2023 and can be found here.  RICS has not yet confirmed when the new Standard will come into force, if approved.  After the consultation, responses will be reviewed by the Expert Working Group (in which RPC is involved) and be redrafted where needed.

When will the new Standard apply?

RICS Professional Standards set mandatory and good practice guidelines for surveyors' ethics and technical competence and are relied upon in regulatory proceedings as well as being relevant to civil claims.

The new Standard is intended as a framework for professional advice on energy efficiency home improvements, including in home surveys and secured lending valuations.  It is particularly aimed at surveyors providing retrofit services to the residential market, including as the lead professional on a project, assessor, designer, contract administrator or post-retrofit inspector.  Retrofit services are defined as including advice on the installation of EEMs and other matters associated with improving energy efficiency, reducing carbon emissions, protecting the building’s fabric and contributing to occupants’ well-being in the dwelling.

Although the Standard recognises that EEMs will change over time as technology advances, it currently envisages that the following works are likely to fall within the scope of the new Standard:

• Carrying out repairs prior to the installation of EEMs;
• Improving levels of insulation and air-tightness;
• Managing moisture in the dwelling, including preventing weather resistance;
• Improving the supply of ventilation in the dwelling (if required), indoor air quality (IAQ) and managing hazards such as Volatile Organic Compounds (VOCs);
• Installing efficient heating and cooling systems and reducing the risks of overheating;
• Provision of efficient water heating and lighting systems and other equipment and appliances; and
• Installing efficient energy control, metering and monitoring systems and Low/Zero Carbon technologies.

The aim is for such works to lead to reductions in energy use, improve internal comfort including internal air quality, eliminate condensation (e.g. by reducing thermal bridging) and issues arising, improve sustainability, flood risk resilience, fire protection and protection of architectural and historical heritage and features.

What are the key requirements of the new Standard?

The emphasis of the new Standard is on ensuring that any retrofit of a dwelling is appropriate for the property and the client, which will require surveyors to exercise their professional judgment since there is an enormous range in the size, nature and location of properties across the UK that will require retrofit works. 

Surveyors will already be familiar with many of the requirements set out in the Standard, such as the need to agree clear terms of engagement in advance; to ensure that one has the right expertise to deliver the services; to be familiar with properties of the same nature as the subject property and the local area; and to ensure any equipment used (for example, to measure condensation) is properly maintained and used in accordance with the manufacturer's guidance.

Surveyors offering retrofit services must be well versed in the differences between the types of service available and be able to identify the advantages and disadvantages of each option so that the client is in a position to make an informed choice on how to proceed (see section 2.5 of the new Standard). This is particularly importance because many clients are unlikely to be familiar with the range of options available.  Data gathered by RICS indicates that 36% of homeowners would not know how to go about making their homes more environmentally friendly. Advice must be property-specific and clearly understandable to the client.

At the outset of the engagement, information should be gathered from the owner and occupiers (see section 3.3) regarding any previous works (including EEMs), the current energy performance of the property, either in the form of an EPC or other energy or assessment model results, if available, such as IAQ test results and copies of energy bills. Surveyors should also enquire whether any previous insurance claims have been made and whether there are any circumstances that might complicate or hinder the installation of EEMs, such as the presence of Japanese knotweed or a protected species. As mentioned above, repairs may need to be carried out prior to commencement of the EEM works, particularly if the property is affected by structural movement, inappropriate previous repairs (e.g. the use of cement-based pointing or render over lime), condensation, water penetration, leaks, fungal decay, wood-boring insect attacks, mould or inadequate ventilation systems.

Subject to the terms of engagement, surveyors involved in retrofit projects must:

• Inspect the property at all relevant stages of the works, and produce an accurate and comprehensive record of the state of the property at each inspection.
• Pay special attention to measures that will help prevent effects such as thermal-bridging, water penetration, moisture accumulation, reduction of internal air quality, poor ventilation, overheating and unnecessary heat loss.
• Be able to identify and advise on defects and deficiencies caused by inappropriate energy efficiency measures implemented at the subject property and advise on the energy assessment of the dwelling.
• Be alert to defects or concealed property elements that could affect the retrofit service, such as deteriorated mortar joints to the external leaf of a cavity wall possibly affecting inadequately galvanised steel wall ties. Where such defects or features are identified, they should recommend further investigation by a suitably qualified person.

Approach the assessment and design of EEM measures holistically, bearing in mind the occupants' practices and lifestyles.

The new Standard is comprehensive and contains a typical retrofit process, as well as detailed guidance (at 4.3.2) setting out what should be considered, documented or done, depending on the role the surveyor has agreed to undertake.

Appendix A will be particularly key as this contains technical considerations for a typical residential property retrofit projects and lists the specific issues that should be considered.

This is also an area of practice where safety hazards will be particularly relevant, since EEMs can negatively impact air quality and lead to radon exposure for example.  Appendix D sets out common safety hazards typically encountered in dwellings such as mould growth and exposure to VOCs.

Key takeaways

Due to the importance of EEMs and their effect on a property's value and desirability, surveyors carrying out residential work should ensure that they familiarise themselves with the new Standard, even if they do not intend to undertake standalone retrofit projects. This would include surveyors carrying out homebuyer surveys and mortgage valuations.

Surveyors should ensure that they only agree to provide residential retrofit services if they have a good understanding of EEMs and are familiar with relevant guidance and legislation, including PAS. The new Standard states (at Appendix A) that providing residential EEM retrofit services requires significant knowledge, understanding, skill and competence and that the requirements for such services will present a significant challenge to the design and surveying professions and the construction industry, given current and anticipated skill levels: "unless careful attention is paid to the necessary detail at all stages of the project, significant, costly and potentially hazardous defects will be built into thousands of UK homes, with resultant negative effects on occupiers’ well-being".   A challenging financial climate drives more civil claims, so this is not an area where work should be undertaken lightly.

Of course, providing advice on EEMs is something RICS expects when carrying out a homebuyer survey (see RICS commentary about the new Standard), so all surveyors advising on residential properties will need to have some familiarity with common EEMs.  There is certainly demand for such advice (RICS found that 78% of respondents would find it helpful if their surveyor could offer retrofitting advice when purchasing a property), but it will be difficult to provide detailed advice within the constraints of a standard survey and valuation.  It would be sensible to ensure that your terms of engagement are clear that you will not be providing detailed advice on EEMs unless specifically instructed to do so.

It will also continue to be important to be clear (not only in your own mind but also in your written agreement with the client) about which role you will be undertaking.  Particularly in smaller projects, "mission creep" is a real risk, which can result in the assumption of a greater responsibility than first envisaged (and quoted for) and make defending a complaint or claim more difficult. In particular, ensure that the terms of engagement are clear about whether you will be inspecting the property during the works and, if so, at what stages.

The new Standard recognises at 4.6 that advice on EEMs may change over time as global and regional legislation and practice and the property itself evolves.  This introduces an element of risk as practices evolve over time, so surveyors should be mindful of the risk of criticism for recommending an out of-date alteration or, conversely, failing to recommend a newer measure.  Keeping up-to-date with developments in this area will therefore be key to avoiding any claims on this basis, as will ensuring that any recommendations made are backed by evidence of their efficacy. 

Background

After the Grenfell disaster shook the industry in 2017, developers across the UK began undertaking investigations into the safety of their own buildings. BDW, acting like a responsible developer, undertook investigations into its own developments and discovered dangerous structural deficiencies in some of its buildings. BDW's case is that the structural design had been negligently performed by URS, leaving some of the structures dangerously inadequate. 

BDW carried out remedial/rectification works, and in at least one case, the building had to be evacuated for the works to take place. 

BDW then sought to recover the monies paid out from URS. 

The claim

URS essentially brought 3 appeals: the first in respect of a Judgment on preliminary issues in the claim of negligence by BDW against URS; and the second and third were appeals to the permissions given in two separate judgments in respect of amendments to BDW's claim. BDW had sought to add claims both under the DPA and for a contribution under the CL(C)A. 

The Issues

The judgment to the appeals touches upon a number of important issues, particularly in light of the uncertainties that have been surrounding the industry in respect of remedial works to buildings. 

We will go into the main issues here, however, for a full explanation please see the Judgment. 

Scope of Duty

This was the first ground of URS' appeal and is one of the primary issues argued when bringing a claim in negligence ie does the negligent act complained of fall within the professional's scope of duty?

In the preliminary issues judgment, the Judge found that, "the risks of harm to BDW, the employer, against which the law imposed upon URS, the structural designer, a duty to take care was the risk of economic loss that would be caused by a construction of a structure using a negligent design such that it was built containing structural deficiencies or defects.” [32] 

URS appealed, arguing the scope of its duty of care to BDW was to guard "BDW against the risk of harm to BDW's proprietary interests and the risk of loss incurred to third parties".[para 25] 

Not only did the Judge dismiss this ground of appeal and uphold the first instance decision on this issue but LJ Coulson stated "it is impossible to conclude that the losses were somehow outside of URS' duty" [para 33].  The risk of harm was actually the risk that the design of the buildings would contain structural defects that would have to be remedied.  

Helpfully, the judgment goes further still in explaining the reasoning for dismissing this ground of appeal. Whilst it was declared that although the Court had not been persuaded there was any direct application of the Manchester Building Society (MBS) case, the Judge, nevertheless, went through the MBS checklist point by point. [paras 35-43]

Reputational damage

Whilst not a main focus of the judgment, it is important to note that the judge rejected URS' assertion that BDW's claim was in fact for 'reputational damage'; ie BDW only remedied the defect to save its own reputation and, therefore, URS should not be held liable for that cost. 

The Judge found that the damages claimed comprised of usual elements such as investigation, evacuation of residents, remedial works etc. and were therefore deemed 'conventional damages'. BDW argued that, at the time the properties were sold, they were liable to the purchasers under the DPA – it was therefore a matter for BDW as to whether they acted on their lability to meet the obligations. 

Whilst the judgment confirms the common law approach is to seek to encourage builders/developers to act in accordance with their underlying obligations and "would if possible seek to avoid penalising them for acting responsibly" [para50], the judgment clarifies that, if the damage is recoverable in principle, then the motivation for carrying out the works is immaterial. 

Proprietary interest 

URS argued BDW's cause of action could only have accrued when it discovered the defects in 2019. By that date, BDW had disposed of its proprietary interests in the properties and, as such, all claims by third parties were statute barred. URS claimed, therefore, BDW did not suffer any actionable damage.  

The Court dismissed that ground of appeal and stated: "there is therefore the highest possible authority for the basic proposition that a claim for defects does not always require a proprietary interest in order for the cost of the remedial works to be recoverable" 

Furthermore, in the second and third appeals, URS claimed that BDW could not claim under the DPA because they sold the buildings after completion and had therefore suffered no loss. Again, this assertion was dismissed and the Court confirmed the recovery of damages under the DPA "is not linked to or limited by property ownership" [para 192].  The loss became actionable when practical completion occurred on buildings that were structurally deficient. 

Any decision otherwise would be deemed to be contrary to public policy because it might dissuade a builder from rectifying defective work.

No physical damage 

URS also raised arguments that BDW had suffered no actionable damage because there had been no physical damage to the property. They argued that the cause of action therefore accrued when BDW became aware of the defect to the building. 

The Court refuted this argument and confirmed there are a number of cases where there has been a defective design but no physical damage in consequence and stated, "if there was an inherent design defect which did not cause physical damage, the cause of action accrued on completion of the building." 

The judge drew on the existing construction and non-construction case law to demonstrate that it is consistent with the usual position in negligence. The Judge held practical completion was the relevant date and the date of knowledge was irrelevant for these purposes. 

Retrospective effect of s135 BSA  

The retrospective nature of the BSA came into question in the second and third appeals by URS, where it was argued that the Judge had erred in permitting BDW to amend its pleadings to include the DPA claims because s.135 BSA could not be applied retrospectively to ongoing proceedings. URS argued that Parliament did not intend for the BSA to change the existing rights of parties that were already engaged in proceedings. 

The Court disagreed. It held that s135 is retrospective and there is no exception which prescribes the rights of parties in ongoing proceedings. Had it been so intended, then the relevant provision would have been included. Furthermore, the longer limitation period in the DPA which is brought about by s135 BSA, "is to be treated as always having been in force" [para161] and therefore, BDW could rely on it.  

The duties owed under the DPA

As well as disputing the retrospectivity of s135 BSA, URS also argued that the DPA was not intended to protect commercial developers such as BDW, but rather it is aimed at protecting lay purchasers. URS argued (amongst other reasons) that, as BDW owed a duty under the DPA to the purchasers, it could be owed a similar duty.

The Court disagreed, using the ordinary meaning of the words of the act as the starting point, it was clear that s1.1(a) DPA applied – URS was clearly 'a person taking on work for, or in connection with the provision of a dwelling' and there owed a duty 'if the dwelling is provided to the order of any person to that person'. On its simple meaning, URS owed a duty to BDW. The Court also confirmed there was no provision stating that the duty cannot be owed to companies. 

Civil Liability (Contribution) Act 1978 (CL(C)A)

URS also appealed against the permission of the amendments adding a claim for contribution under the CL(C)A on the ground that a third-party claim had not been made (nor intimated) against BDW, so no legal right to make a claim for contribution against URS arose.

Again, the Court examined the ordinary meanings of the wording of the CL(C)A and determined there was nothing in S1(1) CL(C)A indicating contribution claims can only arise after a third party claim has been made. It was held that "as a matter of statutory interpretation and as a matter of policy, there is no requirement or obligation for A to serve some sort of formal claim on B before C's liability to make a contribution to B arises" [para 206]. 

Commentary 

Not only does this judgment touch on real and pertinent issues for the construction industry, it is also clear that the Courts want developers to be proactive in rectifying any mistakes they become aware of. Public policy will have played a significant role alongside the legal considerations. 

The requirement to register all high-rise residential buildings with the newly created BSR (operated by the HSE) is one of the key reforms brought in by the Government under the Building Safety Act 2022 (BSA), following the tragedy at Grenfell Tower in 2017.

The requirement to register applies to high-rise residential structures i.e. those which have at least 7 floors or are at least 18m in height and contain at least two residential units. Two or more structures can be registered as a single building where they are connected by a walkway, lobby or basement that contain a residential unit, or by an internal door.

Registration opened in April 2023 and all relevant buildings must be registered by 30 September 2023.  Failure to register an occupied higher-risk building by 1 October 2023 could lead to a fine or imprisonment.  In order to register their building (which can be done online here), the PAP must pay a fee of £251 per building and provide the following details of the building:

• The number of floors;
• The building height;
• The number of residential units;
• The year (or approximate year) it was constructed;
• The building name, address and postcode;
• Names and contact details of the PAP and any other accountable persons.
• The name of the building control body that issued the completion certificate or final notice, if the building was constructed in 2023.

Once these details have been provided, PAPs then have the longer of 28 days or up to 30 September 2023 to provide "key building information".  It is this key building information that the new guidance addresses.  It explains what information about which parts of the building needs to be provided and suggests where it might be found.  Information needs to be provided about the fire and smoke controls, fire doors, energy supplies storage and generation, the materials used in construction, the roof, staircases, external walls, connections to other buildings, the building use and any building work that has been carried out since the original build.  The latter point in particular may take some work to establish, especially in older buildings which may have had a great deal of work done to them since construction.

Anyone with a repairing obligation can be an accountable person.  Normally this would include landlords or superior landlords, but if they are not obligated to repair, this could include management bodies like right to manage companies.  Where there are multiple accountable persons, it is crucial to be clear on who has been nominated to act as the PAP.  PAPs can authorise someone else to act on their behalf in registering the building with the BSR but must be able to show that they understand the buildings for which they are accountable.

Whilst this new guidance is likely to be welcome to PAPs grappling with the requirements of the complex BSA, they reveal that a significant amount of information needs to be provided and there remains only 4 months to gather this information, a timeframe which could be problematic if professionals need to be engaged to assist.  Anyone who is concerned that they might be an accountable person or PAP would be well advised to begin gathering this information and engage any relevant professionals as a matter of urgency. 

The Key Building Regulations provide those managing higher-risk buildings to determine which accountable person is in charge of a specific part of a building.  These are the second set of regulations, The Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2002 (the Description Regulations) came into force on the same date.  The Description Regulations set out which buildings will fall under the new more stringent safety regime laid down in the Building Safety Act 2022.    

What you need to know

As well as laying down how to link parts of a higher-risk building with an accountable person (AP), the Key Building Regulations also set out "key building information" for higher-risk buildings and how to submit that information, including:

• Defining the "key building information" which needs to be submitted to the Building Regulator;
• Clarifying information needed in respect of attached structures or outbuildings which are not part of the higher-risk building; the building's use; the materials and fixtures used; and the structure (including staircases);
• The duties of the Principal Accountable Person (PAP) and AP including information to be submitted to the Building Regulator and deadlines for applications for registration or changes;
• How the information is submitted to the Building Regulator i.e. electronically and in a specified form;
• Which specific parts of a higher-risk building the AP is responsible for once occupied due to their legal title under which they have a repairing obligation.

These regulations will be of particular relevance to property managers acting in the role of Accountable Persons.

For further information, please contact Kat Cusack.

What happened?

In this Court of Appeal case, the appellant owned land that adjoined land owned by the BCC. Japanese Knotweed had been present on BCC's land for over 50 years. The appellant bought his property in 2004 and the knotweed on BCC's property began to cause a problem from 2013 onwards. However, BCC did not take steps to treat the knotweed on its own land until 2018. The district judge found that the BCC had breached the relevant duty in nuisance from 2013 to 2018 until it began to carry out treatment on the knotweed. 

Notwithstanding the breach, the district judge dismissed the claim, relying on the decision of the Court of Appeal in the case of Network Rail v Williams to find that "damages for diminution in value of the property [were] irrecoverable as it constituted pure economic loss".  On appeal, the Circuit Judge upheld the findings at first instance.  Mr Davies appealed both decisions to the Court of Appeal on the grounds that both judges had "erred in that they [had] misunderstood Williams".

Diminution value: pure economic loss?

The Court of Appeal examined the judgment in Williams and assessed the criteria used by the judges in reaching their decision. It determined that "in a case in which the knotweed is on the defendant's land, even if it is close to the boundary and at risk of invading the claimant's land, Williams holds that the reduction in market value of the claimant's land which this causes does not result from physical damage nor from physical interference with the claimant's property and therefore does not amount to a nuisance". However, the Court of Appeal went on to distinguish the situation in Williams from this case, where nuisance had been established, stating: "once it is accepted that there was damage leading to a loss (the diminution in value) which was consequential on the nuisance, there is no authority that consequential damage to the claimant's economic interests is irrecoverable."

One point discussed by the Court was whether it would have made a difference if the encroachment of knotweed on the land was trivial. However, the Court of Appeal stated that this was not the case and neither party had argued the point at trial.

When it can be established that there is a natural hazard present on a claimant's land, the land's 'amenity value' will be diminished, thereby constituting 'damage' under the tort of nuisance. The Court held therefore that "if consequential residual diminution in value can be proved, damages on that basis can be recovered. They are not pure economic loss because of the physical manner in which they have been caused". 

The Court of Appeal confirmed that any attempt by the appellant to treat the knotweed on his land would have been futile unless BCC treated the knotweed on its land. "The harm to the quiet enjoyment and amenity suffered by the appellant persists in 2018 precisely because the nuisance is a continuing one. The harm has been caused by the breach of duty".

The Judge granted the appeal and awarded the full residual diminution in value claimed, which was £4,900.

Help or Hindrance? 

At first blush it may seem that this decision goes against the aims of the RICS guidance by determining that, after treatment, knotweed can still constitute a nuisance and result in a diminution in value of property. However, there are some points to bear in mind. The knotweed in question was present on the BCC's land for over 50 years and treatment was only carried out from 2018. Whilst it is stated the treatment was effective, given the short amount of time that had passed since the case was heard and the conclusion of the treatment, this may not have been sufficient to determine whether the knotweed had indeed been completely managed. The parties agreed there was no visible knotweed present on the appellant's land, but it is often the case that there needs to be a management plan to ensure there is no regrowth. Indeed, the Property Care Association advises that properties may need monitoring for at least two years once treatment has completed to ensure there is no regrowth.

In addition to the above, the respondent did not produce any expert valuation evidence to contradict the appellant's expert evidence on diminution. The Court indicated that, if the respondent had wanted to make any points on the quantum, it should have produced its own evidence.

It was agreed that residual diminution in value reduces over time and therefore, perhaps if the claim had been brought in a few years' time, the sum claimed may have reduced. 

Takeaways

• Always refer to the 2022 RICS guidance (it is important to note that both Williams and Davies were decided after consideration of the previous RICS guidance, published in 2012).

• Think 'management' and not necessarily 'eradication' if knotweed is present

• Consider the environmental implications of any treatment recommended

• If faced with a claim for diminution in value arising from the presence of Japanese knotweed, consider carefully whether you obtain your own expert evidence on the point. If you don't, the court is likely to accept the claimant's unchallenged evidence.

If you have any questions on the issues raised in this article, please contact Alex Anderson or Kat Cusack. 

Following the many bills and regulations that have been introduced relating to building safety following the Grenfell tragedy, there was much concern by leaseholders (and taxpayers) as to who would be responsible for paying for the remediation of buildings needed to bring them up to the requisite standard. 

The Levy was first consulted on in February 2021. It was designed to protect the taxpayers and leaseholders and ensure the costs of the remediations for higher risk buildings fell to developers. The new proposals under the second consultation aim for the Levy to contribute towards remediation of cladding in buildings over 11m.  At least 49 developers have already pledged over £3million towards the remediations but it is thought there will still be a shortfall, which will need to be funded by the Levy.

The Government has confirmed the consultation will cover:

• Overview and update
• Exclusions
• Supportive measures
• Impact on industry
• Sanctions and incentives
• Appeals

The Government states "the levy will apply to all new residential buildings that require building control approval" and "will be payable by the client" which is the responsible developer. There, are, however, some expected exclusions to the Levy, to ensure community facilities are not affected, such as hospitals, children's homes etc. 

One of the main features of the consultation concerns collection. It is proposed that the Local Authority will collect the Levy and suggests a two-step process, alongside two of the gateway stages proposed by the Building Safety Act 2022.  Given the extent of the buildings that will require to call on the Levy is currently unknown, as is the amount that will be received by the Levy, the government is proposing to review the Levy itself every three years. 

Another aspect on which the Government is seeking to consult is the sanction issued for non-payment of the Levy. It is proposed that the principal sanction will be halting the progress of the development either by way of a stop notice or withholding final building approval. Further sanctions are proposed if misleading or delayed information is given. It remains to be seen whether this will indeed make its way into the final Levy and/or if it will have the effect anticipated. However, if the sanctions are not sufficiently serious, there will be no incentive for developers to comply. 

One area of concern highlighted by the second consultation is the impact of the Levy on the cost of projects.  The Levy will, of course, increase costs. The Government has responded to this concern by indicating that, eventually, the cost will 'feed' into land prices as it will affect the amount that developers are willing to pay for land. This, however, does not appear to address the concern about what will have happen with current developments. In reality, ot will take time to fully understand the impact of the Levy on the price of land and/or the impact on frequency of new projects undertaken.  

The consultation is due to end in February 2023 and the Levy is expected to come into force in later next year. 

For more information on this consultation or any of the changes brought in by the Building Safety Act 2022, please contact Alex Anderson or Kat Cusack.

This article was first published on The Practical Law Construction blog on 1 November 2022.

In a recent survey undertaken as part of the RIBA Construction Contracts and Law Report 2022, it was reported that over a third (37%) of respondents had used two-stage procurement over the last 12 months. We are similarly seeing two-stage procurement being used more and more in the construction industry, particularly for major building projects. In fact, the majority of recent development projects we have advised on in the UK were procured on a two-stage basis. 

What is two-stage procurement?

Two-stage procurement (sometimes referred to as two-stage contracting or two-stage tendering) is when a main contractor is instructed on a construction project in two stages: firstly, for the pre-construction phase to carry out pre-construction services (often competitively tendered on a limited design basis) and, then, for the construction phase to carry out the main works for the project (often competitively tendered once the design has been sufficiently developed, for example to RIBA Stage 3 or 4).

Pre-construction services tend to include assisting the employer and the professional team with design development, advising on programme and buildability of the project, tendering key sub-contract packages (usually on an open book basis), signing off on the cost plan (whether provided by the employer or its professional team or the contractor) and developing and finalising the contract documents together with other commercial details for the contractor’s stage two tender. The pre-construction phase can sometimes include preliminary on-site works or procurement of long lead items.

Usually, the mutual initial intention will be for the contractor to be appointed for the main works in order for the construction phase to benefit from the contractor’s early project involvement. However, for the reasons discussed below, neither the employer nor the contractor will be committed at the outset of the pre-construction phase to progress with the second stage.

Why is two-stage procurement used?

Early contractor involvement promotes collaboration among the project team, with the project benefiting from the contractor’s expertise from an early stage.

The pre-construction phase can be used by the parties to develop and firm up the price for the main works on a transparent basis. Two-stage procurement should deliver greater cost certainty and reduce bid qualifications for the stage two tender as the contractor will have the opportunity, during the pre-construction phase, to assess the risks of the project (such as the condition of the site and any existing structures) and tender key sub-contract packages transparently. This can however lead to an overall higher (albeit more certain) quote from the contractor for the second stage and it does not avoid the risks of rapidly rising inflation impacting on subcontract prices in excess of the cost plan.

Early contractor involvement puts the stage one contractor in a more advantageous position compared to its competitors who will not have been involved in the project to date, thereby improving the stage one contractor’s bargaining position with the employer for the second stage. Occasional employers, as opposed to regular developer-employers who have established relationships with contractors, tend to be at greater risk of not being able to tender competitively.

However, there remain incentives for the stage one contractor to price the main works sensibly:

• If not appointed for stage two, the contractor may find itself in a position where it has used staff and resources for the pre-construction services, possibly at discounted rates, which it could have deployed elsewhere on more lucrative projects with long term prospects.
• Some pre-construction arrangements may include contractual incentives, for example, a portion of the pre-construction fee being contingent on award of the main works contract (see Almacantar (Centre Point) Ltd v Sir Robert McAlpine, a dispute highlighting the danger of ambiguous drafting in the PCSA) or an agreed uplift in the main contract allowance for overheads and profit where the second stage offer ends up being lower than the target contract price.
• In the case of regular developers, there is a relationship consideration for contractors as contractors will want to ensure they continue to be appointed on future projects.

Documenting two-stage procurement

We have first-hand experience of documenting two-stage procurement in various ways but, generally, the differences are presentational or mechanical.
We have implemented the following options on our projects:

• A pre-construction services agreement (PCSA) entered into for the pre-construction phase and a separate main works contract (often appended in agreed form or substantially agreed form to the PCSA) entered into for the construction phase once the second stage offer has been accepted by the employer.
• A single contract entered into for the entire project with an in-built pre-construction phase (Combined PCSA/Main Contract).

A PCSA governs the pre-construction phase only whereas a Combined PCSA/Main Contract documents the entire relationship between the employer and contractor, from the start of the pre-construction phase and (assuming the contractor is appointed for the second stage) throughout the construction phase, but under a Combined PCSA/Main Contract the contractor is initially only authorised to undertake pre-construction services and sometimes preliminary on-site works and procurement of long lead items.

Both options include similar processes to authorise the next stage of works. With a PCSA, the parties will need to enter into a separate main works contract upon agreement of the second stage offer, whereas a Combined PCSA/Main Contract will include a “notice to proceed” (NTP), or similar, to be issued by the employer (typically at its sole discretion) to the contractor to instruct the commencement of the second stage once the commercial details (including the price and programme for the main works) have been agreed.

Please be aware that a PCSA is not the same as a letter of intent (LoI) or letter of limited authority (LoLA). A LoI or LoLA is usually used with the sole purpose of instructing the contractor to commence some early activities, which ideally should be done under a main works contract but the terms of the main works contract have not yet been agreed. Conversely, a PCSA documents a considered process to allow for early contractor involvement and deals with a separate scope of work to a main works contract.

While an agreed form of main contract can be appended to a PCSA, a Combined PCSA/Main Contract (where the parties have signed up to all its terms) can sometimes provide more comfort to the parties because, conceptually, the terms applicable to the whole project are agreed, even though a NTP needs to be issued and there are commercial elements to be agreed. Similarly, it can seem worse commercially if a party were to terminate a Combined PCSA/Main Contract prior to the construction phase, rather than terminate a standalone PCSA or, under a PCSA, simply refuse to enter into the main contract.

The parties can, using either option, leave specific clauses relating to the main works deliberately open to be resolved during the pre-construction phase. In our experience, this is more likely to be the case with the PCSA option because the main works contract is only appended but not entered into. In reality, because under either option there is no obligation on the parties to proceed to the construction phase, there is always scope (while often not ideal) to reopen negotiations on the terms and conditions applicable to the main works at the end of the pre-construction phase. In the case of a Combined PCSA/Main Contract, a variation agreement would likely need to be entered into or, depending on how the contract is drafted, variations could be included in the NTP. In the case of a PCSA, the related main works contract (which has not been entered into) would need to be amended before it is entered into.

We have focussed in this post on two-stage procurement generally: what it is, why it is used and the options for documenting it. In our next post in this series, we look forward to focusing on key topics to consider when drafting and negotiating PCSAs and Combined PCSA/Main Contracts.

In March 2003, Serene acquired planning permission to build 13 residential units on a piece of land they had purchased, on the basis that development must commence within five years of the date on which that permission was granted. In 2008, the bank called in a loan it had made to Serene, secured with a fixed charge over the site, and appointed Salata to act as receivers for them.

Due to the lapse of time and the minimal works done on the site since the initial planning permission, it was unclear whether the conditions of that permission had been satisfied to a sufficient extent to remain valid. The receivers submitted that, in these circumstances, they acted reasonably in consulting both the local planning authority and a separate land agent to advise on valuation.

In 2013, Salata concluded the sale of the site for £175,000. Serene believed that a sale at that level was below market value and argued that it amounted to a breach of the receiver's fiduciary duty to take reasonable steps to achieve the best price available. In their submissions, Serene relied on the evidence of an expert valuer, who had advised them that the planning permission was valid, considering the substantial sums they had already spent working on the site. Against this backdrop, their expert valued the site at £575,000.

The main allegations against Salata were that they failed to:

1. engage independent expert valuers to determine the true market value of the site;
2. market the site to an adequately wide pool of potential buyers; and
3. market the development with a good guide price, which would incentivise potential buyers to pitch an amount closer to its true market value.

The Judge rejected these allegations. On the first point, he held that that receivers tend to have sufficient expertise to be able to determine true market value without needing to seek evidence from a valuer.  On the second point, he held that the evidence demonstrated that there was insufficient interest in the site to warrant a wider marketing campaign. As to the third argument, he found that, on the facts, the receivers did their best to achieve a realistic sale.

In his judgment, Judge David Cooke considered the case law, starting with Cuckmere Brick Co v Mutual Finance, the classic case highlighting the duties owed by a mortgagee when exercising the power of sale. This duty involves taking reasonable steps to obtain "true market value" or a "proper price" at the time of sale.

Salata also relied on the case of Meah v GE Money Home Finance, in which the judge observed that simply selling below an expert's valuation is not enough to give rise to a claim.  Rather, what the borrower must show is that, in failing to achieve that value, the lender has plainly breached its duty to take "reasonable precautions taken to obtain that value". The Court of Appeal case of Silven Properties v Royal Bank of Scotland confirmed that this test is applicable to receivers appointed by a lender; and that they have a duty to "take care to obtain the best price reasonably obtainable."

In light of these cases, the judge found in favour of Salata.  He rejected Serene's submission that it was for the receiver to show the reasonable steps they had taken in achieving a proper price.  Where there is no connection or interest in the buyer, the Judge held it was for the claimant to prove the receiver's breach of duty with reference to the specific acts or omissions giving rise to the breach.

This case is important for both the insurer and their insureds as it offers reassurance that claims against receivers are unlikely to succeed, so long as the receiver has acted reasonably. Just because the sale price did not accord with the opinion of an expert will not mean the claimant is entitled to damages. Receivers can take comfort that, if they have taken all reasonable steps, they will have a defence to any claim, even if the price achieved wasn't "right".

Croda, having successfully enforced an adjudicator's decision against Optimus, sought to recover its costs, being £45,078 in respect of the action and enforcement hearing, and £11,862.50 incurred since the judgment. 

Optimus argued that the amounts claimed were excessive, relying on Allied P&L Limited v Paradigm Housing Group Limited where it was held that the claimant was only entitled to recover £20,500 in respect of the costs of enforcing an adjudicator's decision.  In that case, Akenhead J said that it was rare in the TCC in London for an adjudication enforcement application to cost more than £15,000-£20,000.

The judge stated that, as it was 11 years ago, that case was of limited assistance, and awarded Croda £42,578 plus its costs since judgment, noting that these were not out of line with the costs commonly incurred for adjudication enforcement actions.

The full judgment is available here.

nmcn to enter administration

nmcn (formerly known as North Midland Construction) is to enter into administration after its board of directors announced that it was no longer able to continue trading as a going concern.  It had sought to recapitalise through a £24m fundraising agreement with Svella plc and by seeking to raise a further £5m through an open offer to existing shareholders.

In order to finalise these arrangements, nmcn needed to publish its audited financial statements for the year ending December 2020.  However, preparation of its accounts revealed further underlying issues, with expected losses rising to £43m, meaning its approved audited accounts could not be completed.  Accordingly, the agreement with Svella plc and the open offer to existing shareholders were cancelled.

nmcn confirmed that it had received offers for the acquisition of certain trading operations or subsidiaries.

The full statement to the stock exchange is available here. 

Companies bidding for major government contracts will have to commit to achieve net zero emissions by 2050

On Thursday, 30 September 2021 the Cabinet Office announced that all companies bidding for government contracts worth more than £5 million a year must commit to achieving Net Zero emissions by 2050. 

Companies bidding for government contracts greater than £5 million per annum will have to provide a Carbon Reduction Plan confirming the supplier's commitment to achieving Net Zero by 2050 in the UK, setting out where their emissions come from, and the environmental management measures that they have in place and which will be in effect and utilised during the performance of the contract. 

For further information, please click here.

Construction Leadership Council asks Government to stick to spending commitments for major projects

The Construction Leadership Council (the CLC) has issued a letter to the chancellor, Rishi Sunak, ahead of the Spending Review later this month, asking the Government not to cut previous spending commitments on major projects in light of the COVID-19 pandemic. 

The CLC stated it was "under no illusions" regarding the need to rebuild the nation's finances following the pandemic and that, as a result, this Spending Review is unlikely to bring an opportunity for major new construction programmes.  However, the CLC asks that the Government sticks to its previous spending commitments including in respect of HS2, the New Hospital Programme, the Priority Schools plans and flood defences. 

The CLC also encouraged the Government to focus on retrofitting the UK's building stock, pledging to unlock £500m of investment from construction firms for the programme to improve the energy efficiency of the country's buildings.

For more information, see here.

Gove fails to mention planning reforms in keynote address to the Conservative Party conference

Despite reports that Michael Gove, the new housing secretary, has demanded a complete rethink on planning reforms, he failed to mention planning in a keynote address to the Conservative Party conference in Manchester, and mentioned housing only once. 

The controversial planning white paper was not mentioned in the secretary's speech.  However, Mr Gove's reference to "allowing communities to take back control of their futures" when discussing the Government's levelling up agenda has been read as an indication that the centralising proposals in the white paper, such as the removal of the ability to stop individual planning applications in growth areas from being approved and mandatory local housing targets, will not be proceeding. 

When addressing housing, Mr Gove commented that the Government will invest in urban regeneration to put new homes on brownfield sites, while also helping more renters to own their own homes. 

For more information, see here. 

The HSE publishes information on safety case requirements under the Building Safety Bill

The Health and Safety Executive (HSE) have recently published guidance on the detailed safety case requirements which form part of the  measures introduced by the Building Safety Bill.  While the HSE note that the requirements may not make it into law, or be altered before implementation, they invite parties to adopt the measures now in anticipation of their eventual adoption into law. 

The proposals aim, amongst other things, to ensure that buildings in England are designed and constructed to be safe and of a good standard and are managed in such a way that people are protected from the spread of fire or structural failure 

Responsible parties, being those who manage or are responsible for high-rise residential buildings will have to take steps to ensure that:

• their buildings are safe; 
• a safety case is put together; 
• a safety case report is put together.

The safety case approach is intended to ensure that responsible parties adopt measures that are proportionate and effective and ensure that people in and around any high-rise residential building remain safe. 

For further information please click here. 

Thank you to Harry Collins, Jonathan Carrington and Paul Smylie for contributing to this week's edition.

On 6 September 2021, the Ministry of Justice published its response to the consultation to extend fixed recoverable costs (FRC) to more cases.  This follows Sir Rupert Jackson's Supplemental Report on Fixed Recoverable Costs in July 2017.

It is proposed that FRC be extended to all fast track cases valued up to £25,000, with the fast track expanded to include simple intermediate cases valued between £25,000 and £100,000.  To address concerns about a "one size fits all" approach, the intermediate cases will be placed in 4 bands in order of complexity, with band 4 as the most complex.  Counsel's fees will remain ring fenced in Band 4 cases, as well as Noise Induced Hearing Loss cases.

In addition, the consequences of a successful Part 36 offer are to be strengthened, with a 35% uplift allowed.  This is to be assessed against the settled claim, not the estimated claim, to avoid inflated claims.

To read the Government response, please click here.

"Breach of natural justice" by adjudicator

The case of Downs Road Development LLP v Laxmanbhai Construction (U.K.) Limited concerns Part 8 proceedings disputing an adjudicator's decision on the true value of an interim application (IA) where an employer had served invalid payment notices for £1 with true valuations following outside the contractual time limit. The Court held that adjudicator's refusal to consider the employer's defence that it had a cross-claim regarding defective works because it was outside of his jurisdiction was incorrect. Whilst it was likely outside of the contractual list of matters from which an IA could be calculated, it was a breach of natural justice not to consider it.

The judge also rejected the employer's suggestion that the adjudicator's assessment as to the proper amount of the IA could be severed from the breach of natural justice, which rendered the amount payable unenforceable. The alternative "would turn a single decision with an accompanying explanation of reasoning into a series of separate decisions".

To read the judgment, please click here.

Beware of waiving privilege in witness evidence

In the recent High Court case of Scipharm Sarl v Moorfields Eye Hospital NHS Foundation Trust [2021] EWHC 2079 (Comm) the court, applying CPR 31.14, ordered the disclosure and inspection of attendance notes of conversations between the claimant's solicitors and one of the defendant's employees, which were referred to in a witness statement made on behalf of the claimant. 

The court considered whether reference to the relevant documents relied upon in the witness statement had the effect of engaging CPR 31.14 and, if so, whether there had been an express or implied waiver of privilege sufficient to permit inspection of the documents. 

The decision offers some guidance on what constitutes sufficient reference to a document in order to trigger the right to inspection.

To read the judgment, please click here (subscription required).

Construction output down over material shortages

Construction output continues to fall in July 2021 owing to further material shortages and supply chain issues, with the biggest drop being in private housebuilding.  There have also been reductions in public building work and private commercial output. 

Recent data from the Department of Business, Energy and Industrial Strategy identified that construction material costs had risen more than twenty per cent in the year to July 2021, with surveyors forecasting that prices could rise a further ten per cent over the next year.  However, infrastructure and industrial construction work did show a rise in July compared with June, which reflects the Government's spending on infrastructure, and also the shift to online shopping, therefore increasing demand for industrial units. 

For more information, please click here.

Back to the 80s

Construction disputes have more than doubled in value in the last year as the long term effects of the COVID-19 pandemic continue to unravel.

As set out in the previous article, the most recent development concerns the fluctuations in price and availability of materials.  The number of projects rendered unable to proceed due to shortages has reached new heights as parties struggle to deliver projects to agreed cost.  The situation has been likened to the volatile construction environment of the 80s.  

However, all is not lost according to one expert whose solution involves the UK adopting the US approach to construction.  Such action would see projects tendered for prior to costs being decided.  It is suggested that this approach may provide a starting block for the UK to get the market moving again.  

To access the full article please click here.

Thank you to Emrys Moore, Nina Charalambous and Lowri Evans for contributing to this week's edition.

• Take no action.
• Issue a reprimand. This marks that the conduct or competence of the architect was unacceptable.
• Issue a penalty order. If imposed the architect will have to pay an amount up to £2,500, or £5,000 if both UPC and SPI are proven.
• Make a suspension order. This suspends the architect from the register and will prevent them from practising as an architect for a period of time.
• Erase the architect from the ARB register. This means that the architect would be barred from working again as an architect in the UK.

The PCC should consider sanctions in ascending order from the least severe, up to the most draconian sanction of erasure.

In determining the appropriate sanction, the PCC will take account of aggravating and mitigating factors. A detailed list is set out in the sanctions guidance, but these include aggravating factors such as previous disciplinary findings, concealment of wrongdoing and dishonesty. They also include mitigating factors such as whether it was an isolated incident and whether the architect has demonstrated insight and remorse.

Adverse disciplinary decisions are usually published on the ARB website, with the time frame being dictated by the sanction that is imposed. Following amendments proposed by the Building Safety Bill, it is likely that in the near future the ARB will also put unspent disciplinary convictions next to the Architect's name on the Register.

The Architects Act 1997 provides a right to appeal to the High Court in limited circumstances if the architect disagrees with the findings or sanctions imposed by the PCC. Any appeal must be issued within three months of the date on which notice of the decision is served; however there are of course more immediate concerns such as whether any steps should be taken to prevent an adverse decision entering the public domain in the interim thereby avoiding any potential reputational damage.

This concludes our series of articles on the ARB's disciplinary process.  If you receive any indication of a complaint or notice that you may be subject to an investigation by the ARB, please do not hesitate to contact one of the RPC team.

CityFibre has begun work to bring full–fibre broadband to almost every home and business in Chichester.

Full-fibre broadband uses 100% fibre optic cables to carry data at light speed from a home to the point of connection. It is described by BT as being 'next-generation broadband with a dedicated connection that runs straight to your home. It uses the latest fibre-optic technology to offer gigafast download speeds up to 900Mbps and ultrafast upload speeds'.

The work is being carried out by CCN Communications Ltd on behalf of CityFibre, and is part of CityFibre's £195m plans for Sussex. The project is expected to reach overall construction by late 2023.

Adrian Smith, CityFibre's city manager, says: 'We cannot wait for residents and businesses to see what is possible with digital connectivity that propels you forward rather than holds you back. And once the network’s built, it will serve the community’s connectivity needs for decades to come'.

For more information, please click here.

National Highways and Minecraft education package

National Highways (formerly Highways England) has teamed up with Minecraft, which is a 'sandbox' video game, to create a learning package for school children.

Players have the option of five games designed for Key Stage 2 (aged 7 – 11) and Key Stage 3 (and 11 – 14) which can be played alongside lesson plans and game guides for teachers. In addition, there are three games with 'creative mode challenges'. Within the games, students will learn about science, technology, engineering and maths (STEM) subjects. National Highways says that the students will 'see what it takes to build and maintain a road. And they can learn about protecting and improving biodiversity, conserving heritage for future generations to enjoy, creating new technology to make our roads safer, and operating machines to build one of the world’s largest tunnels'.

Natalie Jones, talent delivery lead, says 'We want to inspire the next generation of talented engineers and scientists, on whom the country’s infrastructure and national economy will one day depend. Our ambition is to seek out the next James Dyson or Dame Sarah Gilbert and help put them on the path to a fascinating life and career. With the help of Minecraft and the in-game activities, students will get first-hand experience of what would go into building a huge bridge or digging a giant tunnel. In real life these are multi-million pound structures that are carefully designed and then built by experts. These skills and expertise help to create the motorways and main roads that keep us all moving, whether going to work, delivering goods or keeping families and friends connected'.

For more information, please click here.

Wood and steel driving record material prices

The price of building materials rose 4.5% in July 2021 and 20.1% year on year to reach a new record high, with the construction materials price index at its highest point since current records began in 1996.

Propping up this increase are significant rises in the costs of plywood (up 87.1%), fabricated structural steel (up 64.7%) and imported sawn or planed wood (up 64.2%). As a result, the majority of UK construction subcontractors are reported to be struggling with the cost and a lack of availability of raw materials. The industry also continues to be plagued by labour shortages, with 44% of UK construction subcontractors assessing this as the greatest threat to their business.

For more information, please click here.

Contractors urge the Chancellor to extend Super Deduction Allowance to leased plant

Rishi Sunak, Chancellor of the Exchequer, announced in his March 2021 budget the introduction of the 'Super Deduction Allowance' (SDA), allowing purchasers to claim a 130% capital allowance against qualifying new plant purchases.

The Civil Engineering Contractors Association (CECA) and six other industry trade bodies have written to the Chancellor to ask that the SDA be extended to those who choose to lease their plant, rather than purchase new machinery. The CECA notes that many of its members lease and hire plant, rather than purchasing it, in order to access the latest machinery when and where it is needed and as such the SDA does not reflect the practice of many engineering firms. Further, the CECA argues that extending the SDA to leased plant would "provide an added incentive to firms to use the newest plant and machinery, with obvious environmental benefits, as well as feeding through to efficiencies in project delivery".

For more information, please click here.

Insurance for Space Travel

Insurance provider Battleface has launched a travel insurance policy for space tourists (underwritten by Lloyd’s), to cover those travelling with companies such as SpaceX, Blue Origin, Virgin Galactic and Space Perspective. Cover includes accidental death and permanent disablement.

Sasha Gainullin, the CEO of Battleface said: “While space tourism is still in its infancy, several hundred space flights have been sold to ‘civilians’ and demand is growing. This type of product fits with our values of providing people with the confidence to fulfil their dreams.”

He added: “Today’s landscape mirrors the early days of air travel back at the beginning of last century. With the advent of more affordable space travel, costs should come down as demand rises alongside the need for insurance."

The first policy for aviation was written in 1911 and in 1927 the first transatlantic flight flown by Charles Lindbergh was insured.  Battleface is excited to be one of the first companies in 2021 to be providing insurance to space tourism pioneers who want to have the freedom to travel into space.

For more information, please click here.

The BSB introduces a number of regulatory measures for residential buildings and hospitals deemed higher risk (those taller than 18m or 6 storeys).  During the lifecycle of a higher risk building, from the design, through construction/refurbishment and occupation, a new Dutyholder regime will apply.  The thinking behind this is that those who create a building safety risk should, as far as possible, be responsible for managing that risk. 

During occupation, the Dutyholder will be the Accountable Person, which is a new role under the BSB (and there may be more than one such person, in which case a lead will be appointed).  The BSB defines the Accountable Person as "a person who holds a legal estate in possession in any part of the common parts" or, if not legally owned, a person "who is under a relevant repairing obligation in relation to any part of the common parts".  This position may be fulfilled by an individual, partnership or a corporate entity, including a property management company. 

Given the significance of the role, and to ensure success of the regime, enforcement and sanctions will apply for non-compliance among Accountable Persons and also Responsible Persons (i.e. those with control of a property under Article 3 of the Regulatory Reform (Fire Safety) Order 2005).  It is therefore important for all property managers to understand the obligations placed on them as a result of the new legislation, to ensure they are ready to comply with its requirements before they come into force.    

The Accountable Person will be under a statutory duty to:

1. Assess the building safety risks, take reasonable steps to prevent them from arising and limit the severity of any incidents from such a risk on an ongoing basis.
2. Document, and keep up to date, the steps taken in a "safety case" of evidentiary documentation identifying, managing and mitigating building safety risks; and a "safety case report" summarising and justifying all safety measures in place.
3. Register an in-scope building with the newly appointed Building Safety Regulator (BSR) before residents move in.  Higher risk buildings already in occupation must be registered within a set period once the new regime is in force.  
4. Once registered, apply to the BSR for a Building Assessment Certificate (the Certificate).  Once the Certificate is issued, residents can be satisfied that the Accountable Person has been assessed and is meeting their statutory obligations at that time.
5. Maintain the "golden thread" of safety information from all Dutyholders, started during the design and construction process and handed to the Accountable Person on completion.
6. Appoint a Building Safety Manager (BSM) to support the Accountable Person and be accountable for the day-to-day management of building safety, such as maintaining fire protection systems and briefing residents on safety.  The BSM will also serve as the official point of contact for residents.  This position may be filled in-house by the Accountable Person if they have the requisite qualifications and competence.  The Chartered Institute of Building (CIOB) has launched a new Certificate in Fire Safety and a Level 6 Diploma in Building Safety Management, designed for professionals moving into this role.  The BSM will also need to be organised with good communication skills to build and maintain relationships with residents.  The British Standards Institute will also be publishing standards for the necessary qualities a BSM needs, by Spring 2022.  Appointing a satisfactory BSM is considered by the BSR as part of the application process for the Certificate.     
7. Establish a structured process as part of their mandatory occurrence reporting obligations and provide reports of such occurrences to the BSR.        

The purpose of an Accountable Person is to ensure someone (whether a person or corporate entity) is responsible for the safety of higher risk buildings, with a clear record of any measures taken by them to resolve safety issues that may arise.  The BSB was laid before Parliament on 5 July 2021 and is likely to gain Royal Assent and become law by July 2022.  The Accountable Person's obligations are intended to come into force within 12 to 18 months of the Bill receiving Royal Assent.  We therefore expect this to take place from the middle of 2022 to early 2023.  This gives property managers plenty of time to acquaint themselves with the requirements and obtain any qualifications, if necessary.  We suggest it is not too early to begin planning now and start to think about the processes needed ahead of time. 

For further information or assistance, please contact Alex Anderson or Kat Cusack.

RIBA announces South West award winners 2021

RIBA has announced the winners of the 2021 RIBA architectural awards for the South West.  Winners include Ney & Partners and William Matthews Associates, who designed the new footbridge at Tintagel Castle, and Grimshaw, who have repurposed a former industrial building into Bath Spa University's new schools of art and design.  

RIBA has also specially recognised four projects for their "excellence in sustainability, exemplary approach to conservation, inspirational Project Architect or design quality at a small scale".  Winners in this category include The Story of Gardening, by Stonewood Design, Mark Thomas Architects and Henry Fagan Engineering, and Windward House, an eighteenth century farmhouse transformed by Alison Brooks Architects.

Please click here to read more about the award winners. 

Contractor fined £40,000 following breach of duties

Peter Duffy Ltd, a West Yorkshire-based contractor, has been fined £40,000 by Leeds Magistrates Court for breaching the Health & Safety at Work etc Act 1974, after seven of its employees were diagnosed with Hand-arm Vibration Syndrome.  The medical condition, also known as white finger, was diagnosed by a new healthcare provider brought in by Peter Duffy Ltd in 2016.  

The Health and Safety Executive (HSE) said that the company had provided inadequate health surveillance prior to 2016, which constituted a breach of the company's duties towards its employees.  The HSE inspector noted that companies must undertake "suitable and sufficient risk assessment" to identify the levels of vibration that employees are subject to, and put in place "appropriate control measures" to protect workers.

For more information, please click here. 

Civil firms in material supply jams

A new survey commissioned by the Civil Engineering Contracts Association (CECA) has unveiled a developing crisis in the availability of material supplies.  The issues range from limited availability of skilled operatives to increasing costs and tender prices.  

CECA chief executive has stated that the effects of the COVID-19 pandemic and Brexit are still being felt by the industry, with poll results showing up to 73% of firms experiencing supply chain problems.  Whilst it is positive that the industry is displaying continued growth, the government is being called on to identify practical solutions to this situation.  

If the concerns are not remedied in the immediate future, the recent backlog may threaten the UK's already vulnerable economic recovery.  

To see the full article, please click here.

Clarity on liquidated damages

In the recent case of Triple Point Technology Inc v PTT Public Company Ltd [2021] the Supreme Court affirmed that if a contract is terminated prior to practical completion, the contractual claim for liquidated damages is not lost.  Despite the claim stemming from the IT sector, the principles transfer to the use of liquidated damages in construction contracts.  In this case it was held that the termination date becomes the end date for which liquidated damages can be claimed up to.  Following the date of termination the employer can instead bring a claim for general damages.  

This decision was quickly followed by the Technology and Construction Court in Eco World v Dobler UK Ltd [2021].  This case focuses on the application of a liquidated damages clause where partial possession has been taken.  This case also questions whether a liquidated damages clause would limit the contractor's liability for delay damages, regardless of the clause's enforceability.  It was held that the liquidated damages clause was enforceable and the defendant was held liable for the liquidated damages clauses on the whole of the works until practical completion.  

These recent decisions highlight how clear express contractual terms are required for reducing contractors liability following partial possession, as well as how beneficial negotiating clear caps on liability is for contractors. 

To read the full article click here.

Experts encourage flexible working to ease gender gap

As a result of the COVID-19 pandemic experts have been debating the benefits of flexible working and whether such flexibility is in line with the nature of construction work. It is thought that if flexible working can be incorporated into the industry, it may provide some relief from the sector's current gender imbalance and long facing skills drought. 

A multi-year Build UK study has been carried out on the realities of flexible working, particular for onsite employees.  The results were mostly positive and found that flexible working encouraged greater team work, increased morale and commitment and resulted in projects being finished to a higher quality and ahead of schedule.  

One pitfall which was discovered was that if women are more likely to work remotely, they may inadvertently be excluded from key onsite decisions.  However, this is something which can be actively managed and is offset by the many benefits in respect of mental health and workforce diversity in the construction industry.  

To view the full article, please click here.

Thank you to Tom Westford and Lowri Evans for contributing to this week's edition. 

RICS states "it has been estimated that one-fifth of the total housing stock in England comprises leasehold properties with short and medium term leases" and there are a number of key issues that professionals need to keep in mind when dealing with them.

By providing guidance on the key matters that affect value in residential leaseholds, RICS seeks to assist valuers in navigating the minefield that can be leasehold valuations in order to minimise the risk of both errors and claims. A failure to understand key provisions or onerous lease clauses could materially affect value and increases a valuer's claims exposure.

Matters affecting value

The Guidance Note makes it clear that lenders' expectations of instructed valuers do not go further than the Red Book Global Standards.  However, a valuer is expected to have considered all matters that might affect value when preparing a valuation.  RICS also advises that valuers should avoid placing responsibility on conveyancers for information available in the public domain as this often holds up transactions in an already backed-up market.

The Guidance Note sets out the matters that affect value including (but not limited to): (i) diminishing lease terms; (ii) restrictive covenants; (iii) planning agreements; (iv) health & safety regulations; and (v) ground rents.

This includes valuers being aware and having knowledge of the relevant legislation when conducting valuations, such as the Leasehold Reform Act 1967 which provides certain tenants of houses with longer leases the right to buy the freehold interest of their home; and the Leasehold Reform, Housing and Urban Development Act 1993 (as amended) which provides tenants of flats with long leases with a mechanism by which they can collectively buy the freehold of their building or obtain a lease extension on their individual flat (if certain conditions are met).

Other regulatory requirements, under Landlord and Tenant legislation, obligate freeholders to comply with various regulations in respect of common parts of a building containing leasehold properties, as well as the building itself.  Valuers are expected to have a working knowledge of these as failing to comply could lead to the property becoming unsuitable for occupation and therefore affect the value.  This can be seen in the Homes (Fitness for Human Habitation) Act 2018 (the Act), amending the Landlord and Tenant Act 1985.  Under the Act, a building can be rendered uninhabitable if it suffers defects such as mould and damp or excess cold, leaving it unreasonable for occupation in that condition.

Inspection

A key part to the inspection is ensuring adequate preparation beforehand. The RICS Guidance Note could not be clearer in stipulating that it is a valuer's responsibility to identify and make enquires of the property owner/leaseholder prior to carrying out the inspection and preparing the valuation. This includes considering any other properties in the building and undertaking research and making further enquiries based on what is identified. It also sets out information that the RICS advises the valuer should obtain as early as possible in the valuation process and to ensure that these findings are recorded properly.

As with any valuation, the valuer's notes are critical in risk avoidance. Notes act as evidence to the reasoning behind the valuer's opinions and communicate all relevant information to the client. They also can provide an invaluable tool for rebutting any claim of negligence, by demonstrating the level of investigation and the care and attention taken by the valuer when preparing the report.

Where there is no information available on the issues identified, valuers are able to make assumptions. These assumptions must be clearly set out in the report and, if possible, agreed beforehand with the client.

Whilst valuers are not expected to be legal experts, there is an expectation of knowledge of the type of lease term that may impact on value. They should also be able to identify where there are obvious physical defects within the building, for example affecting the external wall systems, and supporting evidence should be provided wherever possible. Any suggestion of an issue or non-compliance in the building that may have an impact on the value of the property and thus its suitability for secured lending purposes must be clearly recorded.

Diminishing lease terms

One key area of deficiency identified by RICS is awareness surrounding the true 'depreciating nature' of leasehold tenure.  The Guidance Note concisely states "Leasehold properties in general are depreciating assets for both leaseholder and lenders", for the simple reason that, as the unexpired term reduces, so the value of the leasehold interest declines. RICS advises valuers properly to consider the effect of the length of the remaining lease term on the value of the leasehold.

RICS sets out some of the assumptions on which valuers may rely in the absence of specific lender guidance. However, it refers valuers to the other guidance notes it has published, such as the current edition of its Guidance Note entitled Leasehold Reform in England and Wales  and explains that valuers should be aware of leasehold reform issues, even if that knowledge falls outside of their remit for secured lending purposes. 

RICS also advises valuers to exercise caution when relying on information provided and using any assumptions without having first exhausted all publicly available lines of enquiries. Also remember, if you are dealing with a shared ownership property, assumptions regarding leasehold properties may not apply.

Restrictive covenants

Whilst it is not for the valuer to advise on the restrictive covenant itself, they should still be aware of their potential impact on the value of the property, particularly if the terms are extremely onerous. The example provided by RICS is an alienation clause that prohibits subletting. This could adversely affect market value for buy-to-let investors, who will in effect be prohibited for using the property for their intended purpose.

Summary

The issues to which we refer above are only examples of those set out in the Guidance Note and all valuers should study its contents with care. Any failing to meet its requirements and recommendations may not only amount to a regulatory issue but may also be seized upon by any claimant in the event of a claim.

The overall message from the RICS in the Guidance Note is that it strives for valuers to take more responsibility for valuations, identifying as much as possible about the lease and the property prior to inspection, in order to assist their clients in making informed decisions about the property. Awareness is key. Understanding crucial issues affecting leasehold interests such as diminishing terms and how they can impact on value are fundamental in carrying out valuations and for risk avoidance.

Best Practice

• Ensure you have fully documented your investigations and any issues in your site notes
• Document all assumptions or ensure they are set out clearly in your terms and conditions and letter of engagement
• Consider the impact of cladding, and external wall systems and always refer to RICS guidance on valuation of properties in multi-storey multi-occupancy residential buildings with cladding
• Check any information provided on the property and surrounding areas against what is already available in the public domain
• Make sure you have considered all applicable legislation and regulation

If you would like to understand more about this topic, please contact Alex Anderson (who contributed to the production of the Guidance Note) or Kat Cusack for further information.

This review has been prompted by the report of Dame Judith Hackett concerning reforms to building safety in response to the Grenfell Fire tragedy, as well as government plans to amend the Architects Act 1997 to ensure greater competence amongst UK registered architects.  The review also addresses implications of the UK's exit from the European Union and the possibility of recognising international architects independent of European Union Law.

The review aims to ensure that the Government provides suitable support to the UK's architectural sector and advances the aims of providing a modern, innovative and diverse profession that delivers better, greener and safer design and construction.

The call for evidence can be accessed here.

Osborne sells infrastructure arm

Geoffrey Osborne Limited is selling its civil engineering division, Osborne Infrastructure Limited, to the private equity firm Sullivan Street for an undisclosed sum.

Osborne Infrastructure Limited undertook projects across rail, highways and transport hubs under relationships with Network Rail, Highways England and Transport for London.  Sullivan Street has said that Osborne Infrastructure will continue under its current management team.  Meanwhile, Geoffrey Osborne Limited has said that the sale will allow it to prioritise its investments and focus on the residential and education sectors.
The sale is due to complete on 10 September 2021.

More details can be found here.

Green £320m skyscraper planned for the City

Plans have been submitted for a new 23-storey, 117-metre tall office building in Houndsditch.  Designed by architects, AHMM, and intended to set a benchmark for sustainable buildings, the building is to deliver "exemplary green credentials" with "health and wellbeing at its core".  The building is reported to feature green balconies, large roof terraces with trees and innovative sustainable technologies to reduce on-site carbon emissions.  The potential for recycling the existing building’s steelwork frame and processing clean concrete back to aggregate for concrete construction is reportedly also being explored.

Work on site, including demolition of the existing building, is expected to take approximately four and a half years with some 660 workers being employed during construction.

To read further, please click here.

Tender prices forecasted to rise by 21%

BCIS forecasts that tender prices are to rise by c.21% over the next five years, driven by increases in the cost of materials and longer supply times arising principally as a result of the pandemic.  New construction output is forecast to increase by 15% during the same period. However, with fewer contractors in the market to take on this additional work as a result of recent liquidations and decreased access to European labour, the BCIS forecasts pressure on site rates and tender prices. 

In Davis Construction (South East) Ltd v Sanzen Investments Ltd [2021] EWHC 2216 (TCC) (12 July 2021), the claimant sought to enforce an adjudication decision that it was due £162,000 on its final account.  The defendant argued that the application should be adjourned or stayed because it could set-off the final account claim against its counterclaim for defective work.

Applying Squib [2012] EWHC 1958, and RWE Power [2009] EWHC 1192, the judge held that, with a few limited exceptions, a party cannot seek to avoid the consequences of an adjudicator's decision by exercising a set-off.  The contract did not include a right to set-off as an exception to the application of the adjudication provisions of the Scheme for Construction Contracts 1998 (incorporated into the contract).  The counterclaim defence had not been raised in the adjudication.  Even if the counterclaim was potentially valid, there were no grounds to stay execution or not to award summary judgment.

For the judgment, see here (the judgment is not available publicly).

Highways England accelerates switch to lower carbon asphalts

Highways England is asking those involved in the construction and maintenance of the Strategic Road Network (SRN) to utilise warm mix asphalts (WMAs) as standard.  If all production in the UK switched to WMAs, it would save around 61,000 tonnes of CO2 a year, the equivalent of cutting around 300 miles of car journeys.  It would also save up to £70m a year and can be recycled back into new asphalts, preventing waste.

Benefits include carbon reduction (compared to hot mix asphalts), increased productivity (more material can be laid within a given period), improved health and safety, and improved durability (requiring less maintenance in the future).  WMAs account for 40% of asphalt production in the US and 15% in France, but only 4% in the UK.  The plan aims for net zero road maintenance and construction by 2040 and net zero carbon travel by road by 2050. 

For more, see here and here.

Thank you to Felicity Strong, Alastair Stewart and Paul Smylie for contributing to this week's edition.

Three years on, and one year after the draft, Dame Judith's recommendations have finally been reflected in the Building Safety Bill (the Bill).  While the focus of the Bill is on fire safety, it goes further, including establishing a new regulatory body, changing the law on limitation and creating powers to strengthen the regulation of construction products.  Dame Judith is pleased with the Bill, saying she is "delighted that we have reached this important milestone for the Building Safety Bill" wanting to get the system right for the future and "set new standards for building safety".  She hopes residents and other stakeholders can have restored confidence in high-rise buildings and that providers will now be held accountable for delivering safe buildings.  

The RICS also generally welcomes the Bill, which it says "should ensure that this country never allows a tragedy like Grenfell to occur again".  Concerns include a two-tier system of regulation when low rise buildings can also create risk.  

The Bill's aim is to create new powers to ensure building safety for high-rise (18 metres or at least 7 storey) residential buildings as well as hospitals. 

Key points:

1. Building Safety Regulator (BSR): In an attempt to simplify the regulatory regime, the Bill creates a new BSR which will sit under the HSE.  Its main role will be to oversee the safety and performance of all buildings, improve industry competence and implement the new regime.  It will have enforcement powers, carrying prison sentences and an unlimited fine, in order to hold those breaking the rules to account.  The BSR will also establish three committees to support it.
2. Gateway regime: Under the Bill, and implemented through planning law, three 'gateways' will be introduced.  While building safety issues and associated risks are usually brought into focus when seeking a building control certificate at the end of a project, the intention is that, from now on, they will be monitored at each stage of the build, including the planning phase.  The information collected will be submitted to the BSR, culminating in a completion certificate.  This will create a 'golden thread' of information kept digitally for the life of the building (as recommended by Dame Judith).  Such information will be available so that the right people have the right information at the right time.  Upon completion, the information will be passed to the building owner and updated over time by dutyholders and Accountable Persons (see below) to ensure continued safety.  It seems likely that these phases will be included in building contracts.  Issues may therefore arise from delays between each phase, particularly in the early implementation when the system is new to users as well as the newly formed government department.  It will be key to bottom out who bears the risk of each stage before the contract is signed and to ensure that insurance is in place until the completion certificate is issued by the BSR.      
3. Dutyholders: The Bill creates five dutyholder roles for those who commission, design and construct buildings, namely: (i) the client; (ii) the principal contractor; (iii) the principal designer; (iv) the contractor; and (v) the designer.  These dutyholders will have formal responsibilities, including mandatory reporting obligations, to actively manage building safety risks throughout the building process.      
   
4. Accountable Persons: Following the third gateway, an Accountable Person (which can be an individual, partnership or corporate body e.g. the building manager) will be appointed to assess and report on a building's safety and risks to the BSR.  The Accountable Person will also appoint a Building Safety Manager, to manage the building.      
5. Limitation: While the Bill does not provide leaseholders with funding for safety measures, it amends the time period under which legal claims can be brought against developers and contractors.  In the most dramatic change, the Bill will extend the Limitation Act 1980 from 6 to 15 years in respect of claims for: (i) dwellings unfit for habitation under section 1 of the Defective Premises Act 1972 (the DPA); and (ii) breaches of Building Regulations under section 38 of the Building Act 1984.  The cause of action under the DPA will also be broadened to include refurbishment works, as well as new builds.  While breaches of Building Regulations and for refurbishments will apply from the date the Bill is in force, compensation claims for new buildings that are, for example, unfit for habitation will apply retrospectively.  This has been met with dismay from those working in the construction industry.  It places a much heavier burden on them, not only providing more time for claims going forward but also awakening claims they thought had expired.  This is likely to result in an increase in claims, such as for non-compliant cladding, against those involved in the construction process, increasing their liability relating to buildings on which remedial works have already begun; at a time when many will have no insurance for such claims.  It is important for those in the industry to prepare by checking their insurance and taking another look at claims thought to have expired long ago.  For those bringing claims, it may not be such an easy prospect, as the pandemic has taken its toll on businesses so they may find insolvent contractors or a lack of insurance to cover potential retrospective claims.  
6. Developer levy: Developers seeking permission to develop certain high-rise residential and other in-scope buildings will have to pay a levy.  The fund will help government pay for remedial work of building safety defects.  
7. Construction products: The Bill will strengthen regulation in this area to ensure that all construction products marketed in the UK are safe or removed from the market with stiff penalties for breaches.  
8. Architects' competence: The Bill will strengthen the powers of architects' professional body, the Architects Registration Board, to monitor competence.  
9. New homes ombudsman: This is a scheme for new build homeowners to seek redress, outside of the court system, against developers and contractors, should problems arise. 
   
10. Fire Safety Order: Changes will be made to the Regulatory Reform (Fire Safety) Order 2005, including increased fines and obligations to maintain fire safety records.   

Comment

While the new measures should lead to safer buildings and therefore fewer defective construction claims in the future, we are likely to see a significant increase in claims for those already in existence.  With the extension of limitation and retrospective application, liability within the industry has been increased for many years to come.   

Contractor still liable to pay liquidated damages after partial completion

In the recent case of Eco World v Dobler, O'Farrell J the Technology and Construction Court (TCC) held that a liquidated damages clause was not void or unenforceable as a penalty because the contract permitted partial take over by the Employer without a mechanism for reducing the level of liquidated damages payable.  The Employer had challenged the clause in order to claim for general damages.

Applying the test in Makdessi [2015] UKSC 67, the Court said that: it should be slow to interfere with the commercial bargain agreed between the parties; the Employer had a legitimate interest in enforcing the obligation to complete as late completion of any part was likely to disrupt the project as a whole; by fixing in advance the liquidated damages payable the parties intended to avoid the difficulty of calculating and proving such loss; and neither party had suggested that the level of such damages was unreasonable or disproportionate to the Employer's anticipated losses.

For the judgment, see here.

Predicted 10% rise in price of materials

As the construction sector continues to boom, surveyors are braced for a 10% rise in the cost of building over the next twelve months.

Over 38% of the respondents to the RICS Construction and Infrastructure Survey for Q2 reported rising workloads, with infrastructure and the private residential building leading the growth in the sector.  Whilst the outlook is overall positive, the vast majority (82%) of respondents to the survey also reported a shortage of shortage of labour, skilled workers and building materials, which may curb the current boom. 

To read the full article, please click here.

Construction 'supercycle' predicted on wave of government spending

Industry bosses are predicting a long-term, worldwide construction 'supercycle' as developed nations increase spending on modernising infrastructure.  Brussels has begun approving national plans to distribute its €800bn EU recovery fund, whilst the UK has set aside £600bn over the next five years for infrastructure and the US is proposing a $1tn infrastructure package.

Prices for building materials have already jumped as economies around the world reopen and lift travel and lockdown restrictions.  Travis Perkins, the UK's largest builders' merchant, increased prices of bagged cement by 15 percent in May and warned that inflationary pressures would persist.  Holcim, one of the world's largest cement producers, has posted record first-half earnings and has seen shortfalls in materials and sold out product lines.  CEOs and commentators have said that the supercycle will be substantial, although slower than, and unlikely to match, that of the 2000s, which was driven by unprecedented growth for China.

For more, see here and here.

One month to rescue A38 Project

Highways England has been given until the end of August to submit new environmental information in relation to the proposed upgrade of the A38 two weeks after the High Court quashed approval of the project.  

If approved, the project would implement improvements to three junctions on the A38 near Derby.  However, the project faces objection by the Stop the A38 Expansion group.  Finding in favour of the latter group, the High Court decided that the transport secretary, Grant Shapps, had not correctly assessed the full extent of the project's carbon impact in supporting the project and overturned approval of the project.  Now, in another attempt to obtain approval for the project, Shapps has asked the project's stakeholders to assess whether the increase in carbon emissions resulting from the development is so significant that it would have a material impact on the ability of the government to meet its carbon-reduction targets. 

Highways England have said that the upgrade would improve the reliability of journey times between Birmingham, Derby and the M1.  The project also brings the prospect of jobs and further regional development around Derby.  Highways England argues that, in light of the national need for, and considerable public benefits of, the proposed development, the benefits of the improvements outweigh all of its potential adverse effects.
Highways England plan to start work on the project at the end of 2022, if planning permission is re-awarded next summer.

To read the full article, please click here.

Fire at Lendlease Construction Site

On 6 August 2021 there was a fire in the pavilion terrace that Lendlease is building on Deacon Street, Elephant & Castle, South London.  The pavilion terrace is part of a major regeneration project that Lendlease is undertaking in the local area.

The extent (and cause) of the fire damage is unclear at the time of writing, but, unfortunately, one member of the construction team sustained injuries on site and was taken to hospital.

To read further, please click here.

Willmott Dixon Awarded Energy Efficient Centre Contract

Spelthorne Borough Council has engaged Willmott Dixon to design and build a leisure centre that aims to be the first to achieve the Passivhaus standard in the Greater London region.  Read more about the features of the proposed leisure centre here.

Passivhaus is a concept of design and build developed by the Passivhaus Institute in Germany: "A Passivhaus is a building in which thermal comfort can be achieved solely by post-heating or post-cooling the fresh air flow required for a good indoor air quality, without the need for additional recirculation ofair."  Read more about the concept of Passivhaus here.

Thank you to Alastair Stewart, Zack Gould-Wilson and Sharona Zovich for contributing to this week's edition.

If you have any queries or comments, please contact:

• the building's structure, external walls and any common parts. The external walls include doors or windows in those walls, and anything attached to the exterior of those walls, e.g. balconies and cladding.
• all doors between the domestic premises and common parts.

Under Article 3 of the FSO, the "responsible person" of a premises (either a building or any part of it) is the person who has control of the premises ("the Responsible Person"), which may include building owners, leaseholders or managers.

Since the scope and scrutiny of fire safety obligations have been increased, the Responsible Person needs to review and update the risk assessment processes accordingly. Once the risk assessment processes are published, the Responsible Person should apply the risk-based guidance (under Section 3 of the Act) in order to comply with their duties in Part 2 of the FSO.

The clarification provided under the Act, extending the provisions of the FSO set out above, means the Fire and Rescue Authorities can now better identify the Responsible Person for these parts. This will clear the path for enforcement action against and/or prosecution of any Responsible Person who fails to comply with the FSO, which could lead to unlimited fines and/or criminal prosecutions. 

Who will pick up the bills?

Even though the Act now provides better clarification on fire safety responsibilities, it does not mention who is to bear the cost of historical or future remediation works to the premises, for the fire safety compliance. Leaseholders could now face footing the bill for expensive remediation works including the removal of unsafe cladding. 

What has the Government done to protect leaseholders? 

The Government has announced that leaseholders in high-rise buildings above 18 metres will bear no costs for replacing dangerous cladding. They will be providing: (i) £5.1bn funding for cladding in high rise buildings over 18m/6 storeys; and (ii) a long-term, low interest loan for buildings between 4 and 6 storeys. 

This funding is unlikely to be sufficient to cover the bills. In addition, there is no mention of any funds to cover the other fire safety costs, such as internal compartmentation, insurance, etc. 

Insurance 

We have addressed the many issues brought about by fire safety in the surveying and insurance market in some of our previous articles. No doubt the Act is going to bring further issues for insurance in relation to the Responsible Person and those who are qualified to carry out fire risk assessments. RICS is already in the process of trying to resolve the problems surveyors face in this area with the training available for those qualified to carry out the risk assessments.  

What’s next?

The Government's updated risk guidance, which is set to be alongside the Act, is yet to be produced.  

Last month, almost a year following the draft, the Government introduced the Building Safety Bill (BSB) to Parliament. The BSB is designed to further clarify where the responsibility for managing safety risks lies throughout the design, construction and occupation of buildings in scope. In order to achieve this, some of the measures introduced include: a new regulator to oversee the building process (with tougher sanctions at their disposal); changes to the law on limitation; changes to the regulation of construction products; changes to the FSO regarding the maintenance of fire safety records; and new dutyholder and Accountable Persons regimes.  Look out for our further update on the BSB next week.

The Act remains silent on who bears the costs of ensuring fire safety and the BSB does little to save leaseholders from the eye-watering sums that will need to be incurred to remove and replace historically unsafe building materials. The Government now faces a backlash from its own party, as well as others, with the opposition calling it a "betrayal" of leaseholders.  The BSB will now have to make its way through the House of Commons and the House of Lords before it becomes law.  

If you would like to understand more about the impact of the Act, please contact Alex Anderson or Kat Cusack for further information. 

Pursuant to a building contract novated to Toppan, Simply was engaged to construct a care home and subsequently provided a collateral warranty in favour or the operator, Abbey.  Defects were found at the care home and Abbey obtained an adjudicator's decision against Simply for damages for loss of trading profit.

It was held in Parkwood v Laing O'Rouke that a collateral warranty could be a construction contract.  In this case, the collateral warranty was executed 4 years after practical completion and 8 months after another contractor had carried out remedial works.  The court held that it was a warranty as to a previous state of affairs, rather than an agreement to carry out construction works.  Accordingly, the collateral warranty was not a construction contract under section 104 of Housing Grants, Construction and Regeneration Act 1996 and Abbey had no right to adjudicate.

To read the judgment, please click here.

Proposed amendments to the Disclosure Pilot Scheme

The Disclosure Working Group has provided advance notice of changes approved in principle by the Civil Procedure Rule Committee which, it hopes, will receive final approval in September 2021.  Until this occurs, the proposed changes have no formal status.
Key changes include:

• Introduced in Appendices 5 to 7 is a simplified regime for "Less Complex Claims."  A "Less Complex Claim" is a claim that may not benefit from the existing regime of Extended Disclosure.  A claim valued at less than £500,000 should be treated as a Less Complex Claim unless other specified factors indicate to the contrary.  It should be noted that this figure includes non-financial relief. 
• A bespoke approach permitted for multi-party claims. 
• Lists of issues for Disclosure and Extended Disclosure Models C and D: these revised provisions are designed to prevent greater expense being incurred by excluding narrative documents. 
• Amendments to the Disclosure Guidance and Disclosure Certificate.

Further details of the proposed changes are outlined here.

Naylor v Roamquest Ltd [2021] 7 WLUK 448

The court has granted permission for the inspection of replacement cladding panels on six tower blocks, following a two-year programme of remedial works carried out by Roamquest following the Grenfell Tower fire.

The Claimants are the leasehold owners of flats in six tower blocks and applied for permission to conduct instructive inspections on the facades.  The first defendant is the developer and freehold owner of the development and the second defendant carried out the design and construction between 2009 and 2014.

It was ruled that the court had the power to order the inspection of Buildings under CPR r.25.1(c)(ii).  All investigations had to be reasonable and proportionate in all the circumstances.  The inspection was limited to 12 panels in this case and has to be carried out by the second defendant as it is best placed to determine a safe and convenient approach to these inspections.

To read the judgment, please click here.

Stonehenge World Heritage Site Limited v Secretary of State for Transport

The court has quashed the Transport Secretary's decision to grant planning permission for the construction of a new 13km route for the A303, including a 3.3km tunnel through the Stonehenge, Avebury and Associated Sites World Heritage Sites.

The court held that the Transport Secretary was obliged to take into account the impact on the significance of all designated heritage assets.  However, he had failed to take into account the appraisal in the Environmental Statement or the Heritage Impact Assessment of a number of heritage assets, which amounted to a material error of law.

Further, the merits of alternative tunnel options were an obviously material consideration which had to be considered in accordance with the World Heritage Convention and common law.  The court held that the decision not to assess them was irrational.

To read the judgment, please click here.

Thank you to Paul Smylie and Fiona Engledow for contributing to this week's edition.

If you have any queries or comments, please contact Ben Goodier or Sarah O'Callaghan.

1. Provide adequate terms of engagement;
2. Provide an adequate brief (a) in accordance with the requirements of the client or (b) Building Regulations;
3. Have adequate systems in place to regularly monitor and review the professional running of his practice and ongoing projects;
4. Ensure that he held adequate and/or appropriate professional indemnity insurance;
5. Avoid a conflict of interest, by soliciting money from potential suppliers without the knowledge or consent of his clients; and
6. Act honestly and with integrity.

Mr Marcal challenged whether the PCC had jurisdiction to consider the above allegations, given that the ARB had approached Mr Freeborn and Ms Goldie, as opposed to a complaint being received. The PCC roundly rejected this assertion, pointing out that if information regarding potential criminal activity came to the attention of the police, there would be nothing to preclude them investigating the same. This was akin to such a situation and it therefore had jurisdiction to hear the case before it. 

The PCC heard evidence from Mr Freeborn and the Inquirer for the ARB and from Mr Marcal in his defence. It concluded that allegations 1,2 (b) 3 and 4 were proven on the facts. Whilst allegations 2(a), 5, and 6 were found not proven. The PCC concluded that the allegations proven were sufficiently serious to amount to Unacceptable Professional Conduct. 

When considering sanction, the ARB had particular regard for the fact that Mr Marcal's failings had resulted in a significant loss to Mr Freeborn and Ms Goldie; whilst the failings had occurred on a single project they were wide ranging; and there was limited evidence as to the steps that Mr Marcal would take to avoid similar occurrences in the future.  The PCC considered that a suspension order of 12 months was appropriate to mark the seriousness of the failings. It did not consider that an erasure order was warranted as it did not consider the behaviour of Mr Marcal to be incompatible with remaining a registered architect. 

The decision is a cautionary tale in many respects. The take home messages for architects in practice are as follows:

• It reiterates the importance of issuing Terms of Engagement which comply with the requirements of the Code of Conduct and ensuring that the brief is properly and accurately recorded; 
• It is of fundamental importance to have a system for managing a project and keeping a clear record of matters – this both avoids issues during the course of a project and will assist you in defending yourself if issues arise; 
• It emphasises the need to seek appropriate advice from an appropriate expert regarding the level of insurance cover maintained – not only to avoid criticism from the ARB, but also to avoid the risk of having insufficient funds to meet any judgment debt;
• Lastly, it cautions architects to be mindful of public criticism which may come to the attention of the ARB, in particular it is necessary to be mindful whether that judgment is likely to reveal any professional conduct issues which may catch the attention of the ARB. 

We anticipate that this will not be the last time that judicial criticism leaves an architect in a difficult situation with their regulator, and it is important to give this due consideration when defending any professional negligence claim. 

History

The presence of Japanese Knotweed (JKW) can be a real issue for owners of residential properties and those carrying out valuations or surveys on them. The stigma that attaches to the presence of this invasive weed can reduce the value of a property and can cause much stress to the owners, particularly when it crosses boundaries. Neighbouring property owners may refuse to treat JKW which can ultimately end in costly litigation, in addition to the expense of the treatment itself. Furthermore, where professionals fail to identify the presence of knotweed, it can leave them open to claims for breach of duty.  It is imperative that adequate insurance is obtained to cover all risks relating to the presence of JKW.

Previous guidance from RICS on this risk was in the form of the Information Paper issued in 2012. Since then, there have been many developments by way of research and studies on JKW. RICS is now seeking to assist the marketplace and provide updated guidance reflecting these developments. 

The guidance should be read alongside RICS Valuation Global Standards (the Red Book) and will assist in understanding the issue of JKW, its effects on properties and therefore on valuations. The key aim of this guidance is to open up the market further and try to reduce the stigma attached to JKW, particularly for lenders when making lending decisions. 

Developments

The overarching message in the draft guidance is that the actual impact of JKW is not as devastating as previously thought. Common perception of properties that have JKW, or that are adjacent to properties that have it on their land, is that their value must be reduced to reflect its presence. RICS describes this as resulting in parties becoming "unduly risk averse" and having a "disproportionate fear of the problem". 

To help combat this fear, the draft guidance aims to educate and shift the focus from eradicating JKW to managing it effectively. 

We recommend all professionals carrying out surveys or valuations on residential properties read this guidance and we set out some of the key points below.

1. RICS confirms that JKW is unlikely to cause damage to structurally sound buildings. However, it can cause damage to more light structures, such as walls, drains and other ancillary structures. 
2. The distance in which JKW can be expected to have some influence on a structure has been reduced from 7m from 3m. RICS confirms that research has indicated that 7m was too generous a measurement and in fact, 3m for the spreads of the root/rhizome was more appropriate. 
3. Consideration must be given to the environmental implications of any treatment recommended, which can include the use of herbicides and/or excavation. Some treatment options can take years to reach a conclusion and should be backed by an insurance guarantee in case of reappearance.
4. The specifications/limitations of a survey or valuation, as well as the scope of duty in the retainer, must be made clear to clients. This will ensure the professional (and the client) know the extent of the inspection taking place as well as the different options available to them.  If a client wants specific advice/confirmation on the presence of JKW, the professional should recommend the instruction of a specialist remediation company, that is part of a recognised trade body. 
5. Professionals are advised to carry out pre-inspection checks and research into the locality, which may give an indication of whether JKW could be prevalent in the area of the subject property. 
6. Professionals must ensure they make accurate site records when carrying out inspections, including supporting evidence (either verbal, visual or documentary) where possible. 
7. The draft guidance introduces a new assessment method to assist professionals in carrying out a structured assessment of a JKW infestation. The assessment results in a categorisation of the infestation, which sets out: (i) the level of impact; (ii) if action is necessary; (iii) whether remediation is required; and (iv) whether the instruction of a specialist is required. The assessment is primarily aimed at lending, in order to provide the lender with the necessary detail they need to make a decision on the subject property. If the assessment is used for non-lending purpose and there is any JKW present, the professional should always recommend a specialist is required for further advice. 

Did you know? 

• There are smart phone apps that can assist you in identifying whether a plant is JKW.
• There are specialised knotweed detection dogs that can help sniff out rhizomes hidden underground.
• Plant specialists are developing ways to tackle JKW that are actually beneficial to the environment.

Summary

RICS confirms this guidance is designed to provide "clarity and confidence in the market when Japanese Knotweed is encountered". Its aim is to move away from the belief that eradication is the only option and that residential properties may be 'unsafe' or susceptible to damage where it is present.  The guidance seeks to promote effective management of JKW and give professionals the confidence to carry out inspections and make assessments that involve JKW. 

Check-List 

• Is it a valuation or survey?
• Is the client clear on the limitations/Terms & Conditions/Terms of engagement?
• Have you obtained information from owner/seller of the subject property (any issues with JKW/any guarantees/warranties or management plan)?
• Have you carried out pre-inspection research and understand general area (at least information on the general environment and neighbourhood of subject property)?
• Have you considered if any of the features are associated for JKW (local water sources/large open spaces/derelict site etc) – in neighbourhood/leaving property/entrance/driveway/parking/ – use online resources or imaging where available? 
• If recommending treatment, what are the relevant environmental issues?
• Do you have a working knowledge of what JKW looks like during the season of the inspection? If in doubt – use a smartphone app to assist.
• Have you recorded all relevant site details in a site record?
• Have you fully reflected on all potential implications and its impact on the wider market (see 7.2 and 7.3 guidance note)?

Further Information 

If you have any questions on the issues raised in this article, please contact Alex Anderson or Kat Cusack for further information.

The two associations that assist in investigation are: Property Care Association and the Invasive Non-Native Specialists Association (INNSA).  For further information on JKW, visit  https://www.property-care.org/homeowners/invasive-weed-control/ and the invasive weed control library.

The genesis for this latest RICS publication was in the Guidance Note entitled "Risk, liability and insurance in valuation work", which RICS produced in order to assist its members to protect their position following the wave of claims arising from the so-called Credit Crunch in 2008. That guidance focused on valuation work, which was the source of the vast majority of the claims being made against surveyors at that time.  Since 2008, and as market conditions have improved, and the time for bringing claims relating to valuations undertaken before 2008 have expired, so the focus of claims has changed, with an increase in the number of claims relating to surveys and property management, rather than valuation.  The original Guidance Note has therefore not only been updated but also broadened in approach to cover all claims against surveyors.

RPC's Alex Anderson was involved at all stages of the production of the Guidance Note and continues to work closely with the RICS in order to assist surveyors in preparing their risk management strategy.

New RICS Guidance note – effective 1 April 2021

The RICS has stated "This guidance note is intended to assist both members and their clients in understanding the main risks and liabilities associated with surveying. It guides members in the negotiation of equitable contracts with clients and the avoidance of major risks and pitfalls."

Whilst the appendices to the document still look at the specific issues relating to valuations, the majority of the Guidance Note is focused on the risks applicable to the surveyors profession as a whole.

The guidance also still covers the important issues such as liability caps, third party reliance, terms and conditions including the scope of work and the basis on which the fee will be calculated and, of course, valuable guidance on professional indemnity insurance.

One of the key points the Guidance Note makes is that firms should take a fresh look at the terms and conditions on which they engage with their clients and ensure that all the risks are covered. If a firm has any concerns, it is important to discuss these with their brokers and/or seek advice if there is a specific point of concern for their practice.

The guidance has also been updated following the case of Hart v Large [2021] EWCA Civ 24. In essence, this case highlights the importance of the distinction between 'advice' and 'information' cases. This issue was first raised in the well-known case of South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191, when the House of Lords (as it was known then) drew a distinction between a duty to provide information for the purposes of enabling someone else to decide on a course of action and a duty to advise someone on what course of action they should take.  In Hart v Large, a surveyor was found to be negligent for failing to advise the claimants to obtain a Professional Consultant's Certificate before they purchased a property for which he had prepared a survey. The Court concluded that this omission amounted to a failure to given advice, rather than information, which meant that the surveyor was held liable for all losses that the claimants suffered as a result of purchasing the property, rather than only the loss caused by any defects the surveyor ought to have noted in his survey but failed to do so.  The case highlights the importance of defining the scope of instruction at inception, and any limitations or exclusions on inspection, as well as making recommendations for any further investigations that may be required.

For further information about the case of Hart v Large, please see our update here.

Professional Indemnity Insurance

This is a crucial requirement for all professionals and the Guidance Note identifies the fundamental areas professionals should consider with regards to their insurance. It is crucial that professionals ensure they have adequate insurance for their scope of work.

We set out some of the key areas raised by the RICS guidance below.

• Risk assessments: It is important continually to carry out risks assessments to determine whether run off cover is required for a longer period of time to cover the 'long stop' period for claims of 15 years. In this respect, firms should also make sure they consider the issue of document retention. The RICS recommends files are retained for 15 years after providing professional services. This is because it is far more difficult to defend a professional negligence claim without any supporting documentation. Without that documentation, a Court will have to decide the case on the witness evidence which, given the passage of time, is often unreliable. Any lack of evidence for the defence will have an impact on the strategy taken in defending the claim. It is therefore best practice to retain the files for the entire long stop period, to give your firm the best chance of defending any claims or indeed, assessing whether there is any liability.
• 'Round the clock' reinstatement basis: The RICS recommends that, if a firm obtains cover on a 'round the clock' reinstatement basis, it must ensure it complies with the RICS minimum terms requirements and that it provides adequate cover for their professional business.
• Policy Coverage: The guidance also draws attention to the fact that, when signing contractual documents, a professional should be mindful that there may be policy coverage issues relating to of contractual liabilities, such as exclusions of liability where there has been reliance on an EWS1 form and the valuation report does not exclude liability to the lender. As we indicated in our previous article, insurers are still permitted to insert fire safety exclusions in their policies, but this is now limited to buildings over four storeys. Any such exclusions must be considered with reference to each professional practice and the potential impact that the exclusion could have on the services offered.
• Excess: Another point highlighted by RICS concerns the excess under the policy. The guidance explains that "the policy excess may now apply to defence costs for each claim made, even where a claim is successfully defended. Therefore firms need to consider what financial impact this may have given they may now be liable to pay more excesses in one year".

Commentary

It is imperative that firms discuss their policies with their insurance brokers to ensure the firm's risk management profile is accurate and that the firm has adequate cover in place.

It is also important that firms are alive to the consequences of failing adequately to define the scope of work, and to agree terms and conditions, at the outset of an instruction, as well as the importance of retaining documents for 15 years in order to help their firms avoid claims and/or support any defences raised to claims made.

If you have any questions on the issues raised in this article, please contact Alex Anderson or Katharine Cusack. 

The last 18 months have been a turbulent time for both professionals and homeowners and not just because of the pandemic. The market has been locked whilst mortgage companies, insurers and surveyors have been grappling with the issue of fire safety for multi-occupancy residential buildings in the wake of the Grenfell tragedy. 

It is imperative that professionals have adequate and appropriate insurance cover for the work they undertake. However, the uncertainties relating to fire safety and the evolving legislation have resulted in many insurers placing exclusions on their policies, meaning that many firms have been unable to provide advice on properties with fire safety issues due to a lack of available insurance.  Due to the "claims made" nature of PI policies, this has also left firms uninsured for work they had carried out at a time when they were insured for fire safety risks. 

We have previously explained some of the changes put in place by RICS to try to unlock the market (please click here for more information). We have also been advising RICS on disclaimers that professionals can use to minimise the risk of claims, for the benefit of both the professionals and their insurers. 

Changes to Minimum Terms

After the last changes to the Minimum Terms came into effect in May 2020, a number of insurers imposed a blanket ban in their PII terms on all fire safety work undertaken by surveyors. This left many surveyors exposed and uninsured in relation to their fire safety services, past and present. On 1 April 2021, the RICS new Minimum Policy Wording came into effect. We believe the new policy terms will be a welcome change to those previously unable to obtain fire safety cover.   

The new minimum terms now confirm that, although fire safety exclusions will still be permitted in PI policies, "any exclusion will not apply to professional work relating to buildings four storeys or under". This follows the March 2021 Guidance Note issued by the RICS on the valuation of properties in multi-storey, multi-occupancy residential buildings with cladding. 

The RICS has confirmed on its website that "Under the new terms, insurers are not permitted without specific dispensation to exclude fire safety claims on a property four storeys or less and fire safety coverage must be provided as a minimum on an aggregate, defence cost inclusive basis".   

Whilst this means that uncertainties still surround the possibility of carrying out professional work on properties over four storeys, this change will significantly open up the market and assist professionals advising on buildings such as schools, which previously may have been without cover.  

This specific change comes into effect for Insurers on 1 May 2021 and means that surveyors will be able to advise on properties of four storeys or less with the requisite cover in place. 

Future

RICS has confirmed it is continuing to work with the Government and industry to identify practical solutions for the surveying profession when advising on properties which are over four storeys. RPC continues to assist and advise in that process. 

For firms seeking renewals, it is important to liaise with your broker to ensure you obtain sufficient cover. One of the key steps is to seek renewal terms well before the deadline, to ensure you have adequate time to seek terms and to reassure potential insurers of the risk management processes you have in place to reduce your potential exposure to claims.

If you have any questions about anything in this article, please feel free to contact Katharine Cusack or Alexandra Anderson.

1. The RICS has yesterday provided a guidance note, following the consultation which commenced in January 2021, which it states is designed to "help valuers understand when an EWS1 form should be required due to visible cladding". This will hopefully help to 'unlock' the market and speed up the mortgage process. The RICS has indicated this guidance should be implemented by 5 April 2021.  You can find the guidance note here. A supplementary information paper has also been produced in order to "increase surveyor's knowledge of typical external wall cladding systems for building types that may be considered in the External Wal Fire Review' process".
   
   2. As well as this guidance, the RICS has confirmed that it will shortly provide consumer guidance for those purchasing and selling multi-story, multi occupancy buildings.
   
   3. There were a limited number of people qualified to undertake the assessment required for the EWS1 form, and those surveyors were potentially exposing themselves to higher risks, such as claims regarding the completion/assessment itself and whether it was covered by their current insurance policy.  A new training scheme was implemented in January this year, to ensure more people were qualified to carry out the assessment and provide the EWS1 forms. The RICS has indicated that it has secured funding to train up to 2,000 professionals within six months, which will dramatically increase the number of people able to carry out the assessments. Furthermore, RPC has been involved in discussion that have taken place with insurers in respect of the disclaimers and wordings that can assist the people providing those forms. You can expect further developments on this in due course.
   
   4. As we set out in our previous article, insurers faced a myriad of claims in relation to fire safety and the minimum terms were amended. RPC has been drafting terms and conditions to assist and help protect those carrying out an EWS1 assessment and you can expect further updates in respect of our progress later in the year.   
   
   5. The RICS have updated the EWS1 form which can be found here. 
   
   6. In addition to the above, the Government is launching a PII scheme to support EWS1 process - The Ministry of Housing, Communities and Local Government (MHCLG) announced the move alongside its further funding for removing cladding. It said: “The government is aware that securing appropriate professional indemnity insurance to cover the completion of EWS1 forms is a major barrier to qualified professionals undertaking EWS1 forms".