It is generally accepted that Part II of the Housing Grants Construction and Regeneration Act 1996 has brought about significant change to practices in the construction industry, since it came into force on 1 May 1998.
It is also acknowledged, however, that there are some areas where improvements can be made, and others where the law is not working as well as it should.
During 2004, the Government commissioned Sir Michael Latham to undertake a review of the Act and he reported in September of that year. The report contained a large list of recommendations.
The result of lengthy discussions inside and outside the industry is the Local Democracy, Economic Development and Construction Act 2009, which received royal Assent on 12 November. Part 8 deals with construction contracts and is intended to come into force in England, Wales and Scotland, once commencing orders are issued. It does not address all the recommendations in the Latham report, but it does include a number of changes from the current regime, under the following headings:
- Section 139 - Contracts to be in writing
The previous act applied only to contracts that were in writing, whereas the scope of the new act is broadened to include some other contracts. It has been argued this was not necessary, as the previous act allowed for contracts ‘evidenced in writing’ which in itself is pretty broad, but the clarification has been made. To be effective, some of the new points are also required to be in writing.
- Section 140 - Adjudicator’s power to make corrections
An amendment has been made to allow an Adjudicator to correct their decision "so as to remove a clerical or typographical error arising by accident or omission."
- Section 141 - Adjudication costs
Any contractual provision made between the parties to a construction contract which concerns the allocation as between those parties of costs relating to the adjudication must be made in writing, or in writing after the giving of notice of intention to refer the dispute to adjudication.
- Section 142 - Determination of payments due
An "adequate mechanism" for determining what payments become due under the contract, or when, is not satisfied where a construction contract makes payment conditional on the performance of obligations under another contract, or a decision by any person as to whether obligations under another contract have been performed.
- Section 143 - Notices relating to payment
The payer or a specified person must give a notice complying the Act to the payee not later than five days after the payment due date, or require the payee to give a notice complying with the Act to the payer or a specified person not later than five days after the payment due date.
Note: For the purposes of this section, it is immaterial that the sum referred to may be zero.
- Section 144 - Requirement to pay notified sum
The payer must pay the notified sum (to the extent not already paid) on or before the final date for payment.
- Section 145 - Suspension of performance for non-payment
The Act now provides for compensation of costs and expenses reasonably incurred during suspension.
It is always difficult to get consensus in the construction industry. So far reaction has been mixed, with some quarters calling for more discussion, and the inclusion of other items from the original consultation.
It is possible the Act will come into force in 2010, but it may even be delayed further by the General Election
BERR has also in parallel published a detailed Explanatory Note, which is available on their website: www.berr.gov.uk .