The Week That Was - 24 June 2022
Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.
New RICS guidance
The Royal Institution of Chartered Surveyors (RICS) is developing guidance that aims to support valuers and their lender clients with a framework for valuing properties with cladding in line with established standards. This guidance differs from the Guidance Note published in March 2021 which aided valuers and lenders in taking a proportionate approach towards EWS1 assessments.
The new guidance follows the tragic events of Grenfell Tower and its far-reaching repercussions, with data showing that around 10,000 properties still require remediation work. There has been a loss of confidence in blocks of flats and their fire safety which has led to a knock-on effect on the property market. RICS is hoping that the new planned guidance will promote transparency and a consistency of valuation approach, in situations where a lender instructs the valuer to proceed whilst the building’s external walls are still awaiting remediation.
Read more here.
Collateral warranties as construction contracts
On 21 June 2022, the Court of Appeal handed down the judgment in Abbey Healthcare (Mill Hill) Ltd v Simply Construct (UK) LLP [2022] EWCA Civ 823 holding that a Collateral Warranty could, depending on its precise wording, be construed as a "construction contract" within the meaning of the Housing Grants, Construction and Regeneration Act 1996. This means that Adjudication applies to disputes under the Collateral Warranty.
The Court of Appeal held that a Collateral Warranty could be construed as an agreement for the carrying out of construction operations despite it having been executed four years after Practical Completion. This is because Abbey's Collateral Warranty could be distinguished from a product guarantee as "it is a warranty as to future performance."
This case may encourage more claimants to commence Adjudication proceedings for breach of Collateral Warranties.
You can read the judgment here.
Construction companies default on COVID-19 loans
A recent Freedom of Information (FOI) request has revealed that a large number of construction companies have defaulted on their Coronavirus Business Interruption Loan Scheme loans. The loans were taken out with a 12-month grace period before any payments were due. This means that many companies are only now required to start making repayments.
The FOI request shows that over 2,000 of the total 97,000 loans paid out have been defaulted on. It also reveals that the default rate in the construction industry of 2.5% is higher than other industries, such as the art and entertainment sector which has a default rate of only 1.3%.
With costs increasing elsewhere across the sector, the defaults may be a worrying sign of what is to come.
To read more please click here.
Fall in unemployment in the construction industry
The construction industry has seen a reduction of unemployment levels, back to pre-COVID-19 pandemic levels. At the peak of the pandemic, 77,000 construction workers in the UK were out of work, which was the highest number since 2015. However, the number of unemployed construction workers has now fallen to just 46,000. This is the lowest it has been since summer 2019.
The data shows that female construction workers are doing particularly well, with the number of women working in the construction industry now surpassing the pre-pandemic level. Furthermore, the average number of hours worked per week has increased across the sector from 34.8 hours in 2021 to 36.1 hours now.
You can read more here.
DBR takes lead on parliamentary condition survey
Heritage specialist DBR (London) has been appointed to conduct an intrusive survey of the Houses of Parliament. The survey work is a precursor to the massive restoration programme that is planned for the Palace of Westminster.
Starting in July 2022, the project will see the creation of 23 boreholes, up to 70 metres deep. DBR's work will include decanting rooms and protecting heritage assets during works, as well as dismantling and replacing historic fabric to allow intrusive investigations.
DBR will oversee the survey of 160 rooms across Parliament, where floorboards will be lifted, walls drilled and ceiling panels removed to evaluate a range of structural issues, related to the intrusive survey. Simultaneously, specialist M&E teams will continue to inspect the hundreds of miles of interconnected power cables, gas, water and heating pipes, and outdated water and sewage systems.
Read more here.
House completions down, new builds up
Numbers from the Department for Levelling Up, Housing & Communities show that 10,720 new homes were completed between January and March this year, compared to 45,610 between October and December last year – a drop of 10.7%. However, figures also show that the number of new builds started rose by 18.8%
In the House of Lords, Lord Young of Cookham (the previous housing minister) asked the current housing minister, Lord Greenhalgh, whether the government remains dedicated to building 300,000 new homes a year. He was told: “Delivering new homes and regenerating left-behind communities are central to our levelling-up mission and we remain committed to our ambition of delivering 300,000 homes a year. We have made progress, with more than two million additional homes being delivered since April 2010. Over 242,000 homes were delivered from April 2019 to March 2020, which is the highest level for over 30 years.”
You can read more here.
Thanks to Ciaran Garvin, Rakesh Pandit and Ella Ennos-Dann for contributing to this week's edition.
Disclaimer: The information in this publication is for guidance purposes only and does not constitute legal advice. We attempt to ensure that the content is current as at the date of publication, but we do not guarantee that it remains up to date. You should seek legal or other professional advice before acting or relying on any of the content.