Time is money on any construction project and a well drafted pre-planning appointment could save you both.
At the start of a construction project, legal formalities are generally not a priority for the parties, who are more likely to be focused on pre-commencement practicalities, such as selecting the right project team, creating a concept design, preparing a planning application and so on.
Reliance is often placed on the strength of the relationship between an employer and his professional team, with consultants frequently working on a speculative basis in order to meet tight programme requirements. However, you only have to read recent press reports on a high profile scheme, relating to claims by one of the consultants for unpaid fees after they were dropped from the scheme, to realise that this could be a very costly mistake, for both parties.
The bare essentials
Once the parties recognise the importance of a pre-planning appointment, they then need to consider what one should contain. If nothing else, a pre-planning appointment should, in my view, cover the following bases:
A pre-planning appointment should clearly define the scope of services and deliverables to be provided by a consultant during the pre-planning phase of a project.
If nothing is said about the time for performing services, the law implies a term that they will be carried out within a reasonable time. So, if outputs are required to be produced by a certain time, then this should be expressly stated in the appointment.
If additional services are required during the pre-planning period, the scope of those services and a corresponding fee should be agreed by the parties and the pre-planning appointment should be extended accordingly.
A pre-planning appointment should set out what, and how, a consultant will be paid.
Typically, an employer will agree a lump sum fixed fee for the provision of the services, but there are other mechanisms, such as time based fees, calculated by reference to an agreed schedule of rates.
Payment is usually by monthly instalments, with a consultant being paid on a monthly basis in line with an agreed schedule of payments. The alternative is for a consultant to be paid on completion of certain milestones or deliverables. These should be clearly defined to avoid any disagreement as to whether or not a particular milestone or deliverable has been met. The payment provisions should also reflect the payment requirements of the Housing Grants, Construction and Regeneration Act 1996 (and those in the Local Democracy, Economic Development and Construction Act 2009, when it comes into force).
It is possible that the conduct of the parties may imply a copyright licence, but this is a risky approach from an employer’s perspective. After all, this is essentially what an employer is paying his design team for. The pre-planning appointment should contain an express copyright licence which, at the very least:
- Is irrevocable, royalty-free and non-exclusive.
- Entitles the employer to use and to reproduce any of the proprietary material for any purpose connected with the project and/or the site.
- Is transferable and includes the right to grant sub-licence.
- Survives the termination of the pre-planning appointment.
There is no guarantee that planning permission will be granted or, if it is, that an employer will secure funding to carry out and complete a project. Even if an employer secures both, he may wish to carry out the scheme with a different design team. For example, an employer may appoint an architect with particular flare and vision to produce a concept design, but it may be necessary to appoint an organisation with greater resources to take the design to the next level.
For maximum flexibility, a pre-planning appointment should include a right to terminate a consultant’s engagement at any time. In that case, a consultant should be entitled to receive payment for services provided up to the date of termination.
So, in conclusion…
Parties should think of pre-planning appointments in the same way that any discerning Hollywood couple would consider a pre-nuptial agreement. Hopefully the union between employer and consultant will be a successful one, but things can go awry for any number of reasons: financial difficulties, failure to secure planning permission or even interference from an interested royal. If they do, a pre-planning appointment can be worth its weight in gold.