A to Z challenge – R

ecommended considerations in a building project include the following:

Retention is a mechanism in the contract by which a client is legally able to protect itself at the end of project for faulty workmanship. The retention is normally a percentage of the total contract price and is retained for an agreed period – typically six or twelve six months – after which time it is paid out to the builder upon the satisfactory rectification of any building defects which have arisen during this period.

Building Insurance – Most buildings carry building insurance but insurers need to be notified in advance of the start of a building project to be sure they are on notice. This lets them make any changes to the cover or any actions on site that they require for the cover to remain valid and effective. For example, if hot working is taking place and a fire starts as a result causing damage to the property,  it can be seen that if the insurer was unaware of the building project this could cause a problem with the policy and any claim

Liquidated damages – these are damages that can arise on the project and impact the client immediately and financially. It would be normal for the client to specify the level of Liquidated Damages to cover the impact of the project running beyond the agreed contract period so that the building is unavailable for use or that no rent is payable. The sum covered will need to be agreed with the builder before the contract is signed.

Advance payment – in order to begin work on site the builder will need to buy building materials and potentially hire equipment. In some circumstances the builder may asked to be paid an advanced sum to cover this, but the amount needs to be considered in the light of both the value of the contract as a whole and the build time. Certain written Building Contracts will have a provision for dealing with advanced payments if required. Normally the remaining contract sums will be paid in arrears on submission of monthly valuations based upon works completed on-site which will include carrying forward an element of retention, as described earlier. The key to the advance payment and any subsequent payments is trust. The client must be completely RELIABLE in the paying of invoices promptly when they are submitted and approved. Delay can be very serious for a builder and the longer the delay for the larger amount of money could imperil both the viability of the builder, the project and the client / builder working relationship.