What is a Construction Act?
Part II of the Housing Grants, Construction and Regeneration Act 1996, also known as the Construction Act, came into force to identify certain statutory rights of the parties to a construction contract.
Why is it important that the Construction Act applies to my contract?
It is important that the Act applies to your contract as it provides:
- a right to interim payments,
- set dates for payment,
- a right to suspension and to adjudication,
- requirements for payment certificates,
- payless notices issued to dispute payment applications.
Without this, the contractor may be liable to finish the project before getting paid.
How to understand if the Construction Act applies to my contract?
Section 105(1) identifies all the operation considered to be “construction operations” under the Act:
“(a)construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not);
(b)construction, alteration, repair, maintenance, extension, demolition or dismantling of any works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, [F1 electronic communications apparatus], aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;
(c)installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems;
(d)external or internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration;
(e)operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works;
(f)painting or decorating the internal or external surfaces of any building or structure”.
What is more complicated is operations not considered to be “construction operations” under section 105(2). Interestingly, one of them is “installation … of plant or machinery .. on a site where the primary activity is … nuclear processing, power generation, or water or effluent treatment…”
Safeguarding your business
What this means is that if you are providing installations that would normally entitle you to stage payments, but the site is, for instance, a power station – you may not have the rights provided for construction contractors under the Act. In this case, you need to ensure that the right contract is in place to protect your business.
On the other hand, if power generation is a secondary activity on the site you are working on, the Construction Act may still apply (as per case law Engie Fabricom (UK) Ltd v MW High Tech Projects UK Ltd [2020] EWHC 1626 and ABB Zantingh Ltd v Zedal Building Services Ltd [2000] EWHC 40 (TCC)).
Should only some of your works fall within the power generation site (while others are restricted to the part of the site not related to power generation), the works on the restricted site may still fall under the Construction Act (as per the case law Laker Vent Engineering Ltd v Jacobs E&C Ltd [2014] EWHC 4818 (TCC)).
Main Contractors need to be especially careful with hybrid contracts as they need to issue timely payment certificates to avoid paying for unsatisfactory works. For sub-contractors, this is a handy loophole entitling them to stage payments, adjudication and suspension for part of the works that are considered to be “construction operations”.
Get in touch
For more information and specialised support and advice about the Construction Act, get in touch with our expert team at Contract Rite today. Tel: 01780 243 127 or email: consultants@contractrite.com