COVID Lockdown - Top 5 Actions to Protect your Building and Construction Business
By now, we’ve all heard that the latest round of Health Orders have closed Construction Sites in the Greater Sydney Area for Building and Construction Businesses. A ‘construction site’ means a place at which work, including related excavation, is being carried out to erect, demolish, extend or alter a building or structure, or at which civil works are being carried out.
Importantly, there is an exemption for works to ensure the safety or security of the construction site, and to manage environmental risks. That means that you should be at the site today and/or tomorrow, checking that everything is properly braced and secured, weathertight, ensuring that all edge and penetration protection is in place, and checking sediment barriers and controls.
Once you’ve made sure the site is safe, then you need to head back to the home office to make sure you’re safe, and by ‘safe’, we mean contractually safe. Pull out your contracts and check for the following clauses.
1. Extensions of time clauses
Most contracts require extensions of time to be notified within strictly short time frames of the contractor first becoming aware of delays. That means you should be giving a notice of delay to the property owner or Head Contractor and applying immediately for an associated extension of time for practical completion.
2. Contract price adjustment clauses
For many building contracts and, in particular, the main standard form residential building contracts, the implementation of the latest Health Orders will trigger the need for additional works giving rise to an automatic contract price adjustment, which will be due and payable with the next progress payment. Things to consider include the costs of making safe the works, implementing additional environmental controls, temporary works, weather protection, and additional hire costs including for plant that is on site but that cannot be off hired.
Are additional security patrols necessary? Are there additional costs from mobilisation or demobilisation? Are there any materials that will deteriorate, or any works which will require redoing? Do any expected deliveries need to be stored elsewhere during the shutdown, and what are the costs associated with that?
3. Variation clauses
If your contract doesn’t include provision for Contract Price Adjustment, consider applying for a Variation. Most standard form contracts restrict a property owner from refusing variations for works which are required to comply with the law. Refer to the considerations listed above in the contract price adjustment suggestions. Don’t forget that if your works are Residential Building Works within the meaning of the Home Building Act 1989 all variations must be in writing and signed by both parties to be enforceable.
4. Payment Rights
Also, don’t forget to stop and consider your client’s business or employment situation. Is their ability to work also hampered by the Health Orders too? If so, does your contract allow you to request written evidence of their capacity to pay, or even better, to deposit part of the contract price to you in advance? Most of the standard form residential contracts do, and you should strongly consider your rights in that regard.
5. Standard Terms
Lastly, check the standard terms in any hire agreements or delivery dockets for hired plant or equipment. If you can off hire, off hire now and if not, consider whether you are able to suspend the hire agreement. If you can’t do either of those things you are probably entitled to a contract price adjustment or variation in your contract with the property owner of Head Contractor.
There was never a time more important than this for you to review and familiarise yourself with the protections and rights afforded to you by your construction contract, and to make sure you act immediately to maximise your protection.
Free Case Evaluation for Building and Construction Businesses
At Roberts Legal we’re experts in construction and we’re here to help. We can assist with reviewing contracts to advise how to best proactively protect your rights and minimise the commercial impacts of COVID-19, and to answer any questions that you might have.
If you need an answer fast, contact us for a free case evaluation on 1300 553 343.