4. CONSTRUCTION & DEVELOPMENT ISSUES
Prime concern for developer = get the site up and running as soon as possible
o Allows Dev. to maximise income and recoup costs
o Funders want rental income to pay off the loan they have provided
Developer =
o ‘Employer’ – building contract
o ‘Seller’ – sale docs
o ‘Borrower' – funding docs
o ‘Landlord’ – lease
o ‘Developer’ – agreement for lease
CONTRACTUAL STRUCTURE OF DEVELOPMENTS
TRADITIONAL METHOD
(rarer in practice)
Employer
Professional
Architect Building Team
Contractor
Sub
Contractor
1. Owner of property aka ‘employer’ engages architect to design the development by
entering into deed of appointment (DoA)
2. Employer enters into building contract with building contractor to carry out construction
o Details of architect’s design set out in specifications and drawings – annexed to
building contract binding the builder to build to architect’s design
3. Employer appoints ‘professional team’ by entering into DoA
4. Building contractor may engage various sub-contractors by entering into sub-contracts to
carry out specific tasks e.g. scaffolding, plumbing etc.
Allows employer to stay in control of the works inc. design and specifications of the build
Actual build controlled by building contractor
, o If a defect in building found – may be dispute over whether this is from poor
workmanship or poor design
DESIGN & BUILD METHOD
Architect Employer
Professional Employer’s
Team Agent
Building
Contractor
Sub-
Contractor
s
1. Employer employs architect by DoA to carry out initial designs in order to make planning
app
o Depending on how detailed plans are employer may enter into DoA with professional
team as their expertise feeds into design
2. Employer employs building contractor under a building contract
3. Once building contractor signed up, architect’s and professional team’s DoA novated from
employer to building contractor
o Novation = original contract extinguished and replaced with another contract in
which a 3rd party takes up rights and obligations which duplicate those of the original
parties to the agreement
4. Once novated, building contractor NOT employer has direct contractual relationship with
the architect and professional team
o Employer will require collateral warranties from novated architect and professional
team either built into novation agreement or as separate docs to maintain contractual
connection
5. Sub-contractors appointed by building contractor by sub-contracts
Building contractor responsible for all the design and build – gives them control
Simpler from employer’s perspective because there is only one point of contact for the
project
More attractive for a funder because less potential for disputes
BUT can be more expensive for employer to request subsequent alteration to design
Potential for building contractor to cut corners on design to save on build cost and increase
profit margins (depends how early in the design process building contractor gets involved)
Prime concern for developer = get the site up and running as soon as possible
o Allows Dev. to maximise income and recoup costs
o Funders want rental income to pay off the loan they have provided
Developer =
o ‘Employer’ – building contract
o ‘Seller’ – sale docs
o ‘Borrower' – funding docs
o ‘Landlord’ – lease
o ‘Developer’ – agreement for lease
CONTRACTUAL STRUCTURE OF DEVELOPMENTS
TRADITIONAL METHOD
(rarer in practice)
Employer
Professional
Architect Building Team
Contractor
Sub
Contractor
1. Owner of property aka ‘employer’ engages architect to design the development by
entering into deed of appointment (DoA)
2. Employer enters into building contract with building contractor to carry out construction
o Details of architect’s design set out in specifications and drawings – annexed to
building contract binding the builder to build to architect’s design
3. Employer appoints ‘professional team’ by entering into DoA
4. Building contractor may engage various sub-contractors by entering into sub-contracts to
carry out specific tasks e.g. scaffolding, plumbing etc.
Allows employer to stay in control of the works inc. design and specifications of the build
Actual build controlled by building contractor
, o If a defect in building found – may be dispute over whether this is from poor
workmanship or poor design
DESIGN & BUILD METHOD
Architect Employer
Professional Employer’s
Team Agent
Building
Contractor
Sub-
Contractor
s
1. Employer employs architect by DoA to carry out initial designs in order to make planning
app
o Depending on how detailed plans are employer may enter into DoA with professional
team as their expertise feeds into design
2. Employer employs building contractor under a building contract
3. Once building contractor signed up, architect’s and professional team’s DoA novated from
employer to building contractor
o Novation = original contract extinguished and replaced with another contract in
which a 3rd party takes up rights and obligations which duplicate those of the original
parties to the agreement
4. Once novated, building contractor NOT employer has direct contractual relationship with
the architect and professional team
o Employer will require collateral warranties from novated architect and professional
team either built into novation agreement or as separate docs to maintain contractual
connection
5. Sub-contractors appointed by building contractor by sub-contracts
Building contractor responsible for all the design and build – gives them control
Simpler from employer’s perspective because there is only one point of contact for the
project
More attractive for a funder because less potential for disputes
BUT can be more expensive for employer to request subsequent alteration to design
Potential for building contractor to cut corners on design to save on build cost and increase
profit margins (depends how early in the design process building contractor gets involved)
