Retrofitting housing stock – contractual pitfalls

However, there are key issues which are either missed or are not clear when contracting for these improvements. One significant issue has been building safety, where retrofit particularly in high-rise buildings has been largely paused for a long time for obvious reasons. Where schemes are going ahead to single-dwelling houses or low-rise buildings, there are a couple of themes emerging.

You aren’t paying, so you aren’t getting…

Whoever is funding the works, there should be clear expectations for the designers and installers of schemes. If the work is not carried out correctly, local authorities should have recourse to sue the installers for breach of contract and recover damages for having the work put right if the original installer does not come back to do this.

In the broader construction market, contractors are now expecting and obtaining caps on their overall liability for damages to between 100 to 200% of the value of the works. However, we have noted a growing trend, particularly in retrofit, for utilities and contractors to seek to further reduce their liabilities, both in value (to less than 100% of the sum of the work) and in time, with total discharges of liability after two years. Flimsy manufacturers’ warranties might be offered on external wall insulation (EWI) or solar for longer periods, but these are often difficult to enforce. There is a significant risk that defects in measures are only discovered after an extended period (such as when strong wind tests the EWI fixings), which could be too late for any action to be taken. Alternatively, local authorities might have to try to rely on the provisions of the Defective Premises Act or poorly drafted manufacturers’ warranties other more circular ways of dealing with defects, rather than these being clearly and simply set out in the original contract.

Many contractors and utilities offering schemes which are government-funded appear to be adopting an attitude that because the local authority is not paying directly for most of the works, then whatever is provided is a bonus and the local authority should be grateful. This is not the basis for a sustainable long-term retrofit market, and unless contractors and utilities are willing to stand behind their products and their supply chains, then further barriers will be introduced to an already difficult picture. There is no substitute for checking your contract carefully, to ensure that there are appropriate provisions to ensure recourse in the event defects come to light.

No paperwork, no grant

One feature of most grant-funded schemes is the amount of paperwork necessary to claim the grant – most of which rightly requires a demonstration of the increased thermal efficiency of the homes before and after the works. This unlocks the grant. In most grant schemes, the contractor or local authority might have brought the grant to the table, and the contract needs to be clear about:

• who is checking that properties are eligible for grant works,
• the right paperwork is submitted to the grant body at the right time;
• the works are completed within the grant period;
• who is actually receiving the grant money and what impact that have on the contract sum.

Filling in the Joint Contracts Trubunal (JCT) or other contract carefully, so that the liability to pay for the works is clear, is critical. If the contractor or utility has applied for the grant and is in charge of its administration and is receiving the money directly, then the contract sum payable by the local authority needs to be reduced to reflect this. If the contractor or utility is checking eligibility and administering a local authority applied for the grant, then the liability for mistakes when doing this needs to be clear. In short, there have been situations where a failure to pay attention to the grant terms and quite technical requirements has caused difficulties and disputes.

Still up for it?

Leveraging as much funding as possible, to alleviate fuel poverty, and respiratory disease, improve neighbourhoods and get to zero carbon is still a marvellous idea. Making sure that each party is playing its proper part, through having clear and precise contracts will give your scheme the best start. If you are unclear about any aspects of your arrangements, do get in touch to arrange a review.

For more information, please contact Richard Brooks.