Grand designs - Building that dream house

The Construction and Engineering team is often asked to provide advice to clients who are considering engaging a building company to construct a substantial one-off residential property for them, on a particular piece of land. This may be a piece of land which the client has already acquired or, it could be land which the building company/developer has offered to sell to the client before the building work starts. The property is then built in accordance with the planning permission.

With these types of projects, the relationship with the building company is somewhat unique. More often than not, the project proceeds on the basis of mutual trust: the client being confident that based on its track record, the building contractor can, and will, construct the property in accordance with their wishes and with all due care and attention. This often leads to a decision not to sign a written contract, but instead, to rely upon an exchange of emails and/or conversations. Indeed, incurring fees to agree and sign a contract may seem an unnecessary expense – especially when those monies could be spent on enhancing the property.

Perhaps unsurprisingly, our advice is that no matter the level of trust and/or confidence between the parties, a written contract should be put in place. In addition to offering clarity and assurance as to the 'deal which has been struck', it is important for landowners to understand that they have specific legal duties and obligations in respect of the works being carried out on their land which need to be addressed. This being the case, we would suggest that the contract should, as a minimum, address the following points:

  • The price for the works.
  • The description and specification for the works which are to be carried out for the price.
  • When interim payments are to be made and for how much.
  • The start date and the completion date for the works.
  • The insurance arrangements.
  • The requirement for the property to have latent defects insurance cover (e.g. NHBC).
  • Health and safety requirements including the Construction (Design and Management) Regulations.
  • The risk of unforeseen ground conditions and delays.

Many building contractors have their own standard terms and conditions. It is important to remember that these will, more often than not, be drafted in a manner which favours the contractor rather than the client. There is still room for negotiation even with standard terms - we can report on the proposed conditions and, if necessary, suggest appropriate amendments to reflect the parties' agreement and offer the best degree of protection to a client.

Alternatively, there are a number of industry-published forms of building contract with which the construction world is familiar. Most of these include an arrangement whereby the client appoints an independent professional person to inspect and certify the works as the project proceeds. This independent professional provides the client with another layer of assurance and acts as an impartial intermediary between the parties to the contract.

Our experience is that the process of agreeing and signing a building contract before works commence helps both the client and the building contractor to establish clearly exactly what work is to be carried out for the agreed price and by when. In the event that something does not go to plan, the contract will help the parties to resolve the issue, and could avoid turning what should have been a dream house, into a nightmare project.  

If you have any questions regarding this article or would like to discuss this topic further, please contact Alan Tate or Jo Morris in Michelmores' Construction & Engineering team.

This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.