No 'site' for sore eyes: managing on-site disruption

No 'site' for sore eyes: managing on-site disruption

On-site issues can lead to delay and crippling costs, but what can be done to minimise the risks posed by site disruption? Jonathan Hosie and Chris Fellowes, construction and engineering partners at Mayer Brown International LLP, consider the challenges facing construction sites and the best ways to mitigate the risks.

What are the challenges facing large-scale construction projects in terms of site management?

There are a number, for example:

  • logistics planning, particularly for brown field city centre developments
  • highway closures
  • neighbourhood issues, including rights of light and crane over-sailing

Cranes are a continual problem in cities. If a crane is to over-sail a property proper agreements and indemnities have to be put in place which can affect the timing of a project. To avoid such issues, luffing jib cranes, which don’t over-sail neighbouring sites, can be used instead but they are more expensive. Practical issues like this present a range of problems.

Well organised sites tend to have a better health and safety record and better productivity rates. On-site accidents necessarily lead to investigations by the Health & Safety Executive, sometimes site closure and inevitable production delays. They are therefore costly in financial terms, as well in terms of the physical injury caused to the victim.

A lack of skilled site management resources is also a problem. We don’t pay experienced and skilled site managers enough in the UK and so there is a shortage of them. This is being partly addressed through apprenticeships, but generally there are just not enough skilled people around to do the job.

How can lawyers assist in negotiating with the local authority as to terms of access, disruption etc?

Lawyers can help client developers with the negotiation and drafting of ‘section 38’ agreements (Highways Act 1980). These are used for the adoption of new estate roads. Local authorities tend to have a wish list of things they want developers to provide in terms of municipal amenities—from new roads, to roundabouts, walkways, open community spaces—all of which will be part of the planning consent process. Developers build them and later the authorities take them over and maintain them. An important part of section 38 agreements is the date on which the local authority adopts responsibility for the roads which is also the date for the completion of the work. This is a watershed date and the contractor usually can’t get its final payment until this time.

Ensuring that neighbouring property owners also get early notice of plans so you can manage party wall issues is something lawyers can help with. They can also help deal with rights of light and crane over-sailing licences. A lack of objection in the early planning and consultation stages will affect the neighbour’s right to get an injunction to stop the development later on.

How can developers insulate themselves from claims from residents/business owners?

As discussed above—failing to plan is planning to fail. However, the passing of the risk of claims onto contractors is becoming increasingly difficult. This is just due to market forces. If a contractor decides it does not want to assume the risks which are intended to pass onto it, the developer has less of a choice of contractors. Currently, therefore, contractors can drive a harder bargain. Developers should also fully investigate the possibility of insurance from such claims.

Should potential litigation costs be factored into any funding arrangements?

If a proper risk analysis is undertaken (culminating in a matrix with risks ranked small, medium and high in terms of both likelihood of occurrence and effect), this should inform the developer as to the prudent allowances to include for high probability/high impact risks. This could include a litigation cost allowance (or more likely, adjudication risk).

However, it is better to plan for risk mitigation. For example, early consultation with neighbours, adopting proper party wall procedures and addressing problems before they mushroom out of control are all perhaps obvious points but are not always observed in practice. These practical decisions can have a high impact on the potential for litigation. Having early consultations and operating a charm offensive with neighbours are also an important part of community dialogue and may indicate a robust process which will form an important part of the developer’s pitch when it comes to obtaining finance—credit committees need to be persuaded the developer has addressed the likely risks and has a clear strategy for mitigation and control of that risk.

What have been the key cautionary tales in terms of disputes around construction sites?

Inadequate resourcing—both on the contractor and client side—can really lead to problems and delays and litigation.

Also, a lack of pre-planning—that is, entering into a construction contract with insufficient information—leads to problems that could have been avoidable. Rights of light and party wall risks—if not allocated to the party best able to manage them—may end up with the developer being held to ransom by neighbouring owners. The ‘ransom strip’ may literally be the only means of access to realise the development potential of an otherwise stranded site or it may be the consent needed to avoid an injunction to protect other proprietary rights. These are risks that need to be identified in advance by proper due diligence. Where that due diligence is not undertaken, problems arise. These are most commonly on brown-field developments.

Interviewed by Diana Bentley. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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