In our last article, we looked at some of the legal and
commercial risks for builders, which arise out of high rise and
mixed use development construction.
So now that we have identified the risks, what can you, as a
reputable high-rise builder, do to manage them? The following tips
are a good start, but by no means exhaustive:
Learn what you can about who will buy the units you build and
what their expectations are – for example, will they mainly
be owner-residents or investors, first home buyers seeking capital
growth, high-income earners with lifestyle expectations, retirees
and empty-nesters seeking to down-size, etc.?
Learn what you can about the relationships and vested interests
of those who are backing the developer financially. For example,
recent events have highlighted the dangers of developers aligning
themselves financially with proponents of
"get-rich-quick" schemes who leave others to deliver on
their promises of massive returns for very little effort.
Before you sign the final construction contract, compare it
with the tender documents and the developer's sales contracts
and brochures in order to improve consistency between technical
requirements and buyer expectations.
Make sure you know and are totally confident in the
developer's and its superintendent's expertise and
experience in high-rise residential developments.
Examine your insurance policies carefully, and if necessary,
consider taking out additional cover that goes beyond the
traditional professional indemnity for negligent construction and
protects you against some of the "no-fault" consequences
of principals' insolvency;
Standard-form contracts benefit the construction industry by
ensuring consistency of interpretation and risk allocation.
However, you should never just rely on the terms of a standard form
"off the shelf", amend it yourself or accept amendments
proposed by the developer. Take advice first from an experienced
construction lawyer about how to adapt the contract to the specific
circumstances. In some cases, smaller contractors may find it
easier to negotiate favourable changes now that the "unfair
contract terms" in the Australian Consumer Law will apply to
small businesses as well as consumers.
Be aware of the personal stake that the
superintendent/architect, as designer of the works and agent of the
developer – and as assessor and certifier of your payment
claims, work progress and performance - will invariably have in the
success of the design. Take advice from an experienced construction
lawyer about how to protect yourself contractually from the risks
arising from an overly close relationship between the
superintendent/architect and its employer, the developer. Consider
relying on the unfair contracts legislation where a standard-form
contract creates that relationship.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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