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How architects can avoid expensive litigation during disputes involving home occupiers

Words:
Neal Morris

Learn more about the difference between statutory and contractual rights, and one easy fix to help keep disputes out of the courts

It doesn’t matter if the contract doesn’t provide for adjudication because referral of a dispute to adjudication is a statutory right.
It doesn’t matter if the contract doesn’t provide for adjudication because referral of a dispute to adjudication is a statutory right. Credit: iStock Photo

Adjudication is often thought of as a great way to keep disputes out of the courts and provide a swift and relatively inexpensive route to resolution that is far less likely to see contractors downing tools and bringing projects to a halt.

Introduced by the Housing Grants, Construction and Regeneration Act 1996, all parties to a construction contract have the right to adjudicate, including those carrying out architectural services.

For different parties on construction projects to be able to go down the adjudication route to resolve matters, a dispute has to have crystallised between these parties. More often than not, this requirement leads to parties setting out their concerns in written correspondence to ensure a dispute can be shown to have crystallised, before embarking on adjudication. Once the dispute is crystallised, parties are free to refer it to the adjudicator.

One RIBA Specialist Practice Advisor says that he has encountered one common query recently: what happens when home occupiers are involved in a dispute, and how can further action be avoided?

What happens if the contract doesn't provide for adjudication?

Alex Delin, Construction Disputes Partner at Irwin Mitchell and RIBA Specialist Practice Advisor, says that in fact, with clients other than a residential occupier it doesn’t matter if the contract doesn’t provide for adjudication because referral of a dispute to adjudication is a statutory right. If there is no adjudication procedure provided for in the contract, the procedure outlined in the Scheme for Construction Contracts (England and Wales) Regulations 1998 will automatically apply.

The adjudication process is provided by a third-party adjudicator selected by parties to the dispute and is supposed to be completed within 28 days, although time extensions are common. Decisions are binding, there is no right of appeal, and there are very limited rights to resist enforcement, although decisions can be challenged at a later date through arbitration or the courts.

RIBA acts as a nominating body for adjudicators and other forms of alternative dispute resolution. Read more about RIBA's adjudication process.

Home occupiers and adjudication

The exception to all this is when work is carried out for a ‘residential occupier’ (currently occupying, or intending to occupy as a residence) – typically domestic refurbishments, improvements or extensions – where the statutory right was excluded from the 1996 Act.

The thinking behind this, Alex says, was to protect homeowners from being hit with a claim, an adjudication referral and an unexpectedly large bill when they would not be equipped to deal with a fast-moving dispute process.

‘The homeowner looking to have a refurbishment done will be far less well-placed to know what to do when a huge bill arrives from their builder at the end of a project than a commercial client.,’ he says. ‘Further, the homeowner will need to swallow the costs of defending any adjudication referred over non-payment and the like.’

How to ensure home occupier’s contracts include adjudication

The adjudication process can still apply to residential occupier projects where the right to adjudicate is provided in the contract, it is simply the automatic statutory right that does not apply. In other words, residential occupiers can contractually agree for the right to adjudicate to apply where legislation does not confer that right.

Standard forms for domestic works, such as RIBA appointment documents and JCT contracts, have a tick-box allowing clients to opt-in or opt-out of adjudication, leaving architects to explain the merits of the process, or otherwise, to clients.

There is no real consensus on where adjudication should be recommended for domestic projects, Delin says: ‘Each project is different and each client is different, but what we tend to see is more-sophisticated clients opting for adjudication on more expensive and higher-end projects (like basement excavations), when they have the funds and resources to defend claims, should they arise.

‘The ability to adjudicate carries with it greater certainty that differences over these projects can be resolved one way or another, providing parties investing large sums in construction projects more comfort.’

Neither are there any particular implications for architects on the insurance front from allowing domestic clients to opt-in for adjudication, he continues. An insurer will normally cover the outcome of an adjudication that goes against an architect, and will cover defence costs, if it is design related and the insurer has been notified in good time. It is important that notification requirements are complied with.

Why adjudication is a better option that litigation?

The adjudicator is either named in the contract after agreement by both parties, or is appointed by a named nominating body, such as RIBA, which maintains a panel of adjudicators.

The process is often based on no more than documentary submissions and is supposed to be completed within 28 days, though Delin says in practice the process is likely to be extended to two months rather than one.

In contrast, litigation can take 18-months to two years to reach the courts and might cost up to 10 times the cost of adjudication.

If an adjudication award is subsequently challenged in the courts, then the Technology and Construction Court provides a streamlined process recognising that an adjudication decision has already been made, so there is little prospect of the award winner sitting on an unjustified sum of money for two years.

In this way, adjudication allows for a ‘pay now, argue later’ principle to be applied that allows projects to continue to completion, says Delin, making it far and away the industry’s go-to dispute resolution option.

Thanks to Alex Delin, Construction Disputes Partner, Irwin Mitchell. 

This is a Professional Feature edited by RIBA's Practice team. Send us your feedback and ideas

RIBA Core Curriculum topic: Business, clients and services.

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