REUTERS | Esam Omran Al-Fetori

Ask the team: what building contract might I recommend to my high net worth client?

If a high net worth individual wants to carry out work to their house, or even intends to build a new house, what form of building contract might you recommend for their works?

As always, part of the answer must be “it depends”. However, this is one instance where the full suite of JCT building contracts does give you a choice.

This answer assumes that the works will be procured by traditional procurement, that is, the high net worth client has selected an architect to design the works and will separately appoint a building contractor to carry out the works.

Which contract? The JCT suite of contracts

The size, price and complexity of the project are important when choosing which building contract to use.

Starting with the shortest form, intended for the most minor and most simple works, the JCT publishes:

  • The homeowner building contracts.
  • The minor works contract.
  • The intermediate building contract.
  • The standard building contract (in different versions, with different pricing mechanisms).

The homeowner contracts

These self-explanatory contracts are the most straightforward of all the JCT contracts. The JCT publishes one form for use with a professional consultant (such as an architect) and one without for when the client is “going it alone” with the building contractor.

The minor works contracts

These contracts are intended for simple projects. For example, in this context, for an extension to an existing house or the remodelling of the internal layout of a house. They are the most straightforward of the JCT contracts that are also aimed at commercial parties. There are two versions of this contract: one allows for contractor design, the other does not.

The intermediate contracts

These contracts are intended for mid-sized projects. Many practitioners find that they strike a balance between the complexity of a construction project and the need for ease of use of the building contract, although many do choose to amend them.

In this context, a JCT intermediate contract could be used to build a new bespoke house or to remodel an existing, perhaps more substantial, property.

Again, there are two versions of this contract: one allows for contractor design, the other does not.

The standard building contract

The JCT’s standard building contract is often regarded as the flagship of the JCT suite of contracts. However, it would be unusual for it to be used for a residential project. That said, the most complex of projects, such as a new country estate, would easily demand its use. In that case, the approach to the whole project would need to be very similar, in many ways, to a commercial scheme, probably using a schedule of amendments.

The importance of contract administration

Save for one of the two homeowner contracts, all the JCT contracts mentioned need effective contract administration if they are to work. On any project where an architect has been appointed, it would be unusual, perhaps even misguided, to select or use any of the contracts without further input from the architect. In our example, you would not use the homeowner contract that does not call for a professional consultant’s input.

Without effective contract administration, any of the contracts referred to, even the most straightforward, may lead to conflict and disputes.

The high net worth client should consider whether the architect should be appointed to effectively manage a project, as well as design it. If not, the client should consider appointing a project manager or other professional consultant to look after the client’s practical interests. That alternative consultant might also administer the building contract. On a major project, the client may need to appoint a whole professional team.

Don’t forget the architect…

Although, strictly, this is not part of the answer to the question posed, the client should not forget to formally appoint the architect (or any other professional consultant, for that matter). Typically, if the client has found the architect, there is likely to be a letter from the architect referring to a RIBA standard form. However, there may be no formal appointment or letter at all.

The client may be able to use a bespoke letter of appointment, although, in practice, that is unlikely and the client may have to “make do” with a RIBA appointment. If the client does use a RIBA form, formalise the position by getting an agreement actually signed, and if (particularly on a larger project) you can make a few changes to help protect the client’s position, take the opportunity to do so. (For example, check for limits of liability, read the copyright clause, explaining its impact to the client, and check the level of insurance the architect actually maintains is referred to in the appointment.)

Leave a Reply

Your email address will not be published. Required fields are marked *

Share this post on: