Why Construction Liens Should Be Adopted

/0 Comments/in /by

Construction liens are legal claims for money expended or unpaid compensation filed by a contractor or other professional on a building or design. This is done by filing a public notice on a property stating that the owner of the property owes the contractor a stated sum of money.

It can also be filed by a subcontractor or materials supplier for any work done on a building.

The purpose of a construction lien is to serve as an encumbrance on the property upon which a lien is filed. It also gives notice to a bonafide purchaser for value that there is an unpaid sum outstanding to the contractor, subcontractor, materials supplier or other professional. It may prevent interested purchasers from purchasing the property until the unpaid sum is liquidated.

Benefits of a Construction Lien

When a Construction lien has been effectively filed, it acts as an encumbrance on the property and any third party who goes ahead to buy the property obtains title subject to the lien. It prevents the sale or refinance of the property because a prudent purchaser or mortgagor will not want to obtain a property that has a lien on it. The lien helps contractors, sub-contractors, material suppliers and other professional to quickly resolve payment problems.

Constructive lien also gives the holder of the lien an equitable interest in the property because failure of the property owner to clear the outstanding debt can grant the lien holder the right to foreclose the property after a period of time.

Furthermore, when the lien is placed, it hastens the property owner’s decision to clear the unpaid sums. It is an additional remedy granted to contractors in addition to the right to sue for a breach of contract. Nevertheless liens are not absolute; a property owner who is disputing the sum claimed can challenge the lien in Court.

Other Jurisdictions

Construction lien in its modern form originated in the United States of America after it was introduced by Thomas Jefferson to encourage the construction of Washington. Today, it is applicable in all states in United States and a lot of developed countries like England, France and Canada. However, Countries in Latin America and UAE specifically prohibit the lien except where the parties voluntarily adopt it as binding on them.

Current Situation

Construction liens are strictly regulated by statutes. Unless there is a law stipulating its procedure it can generally not be applied. In Nigeria, construction liens are generally not applicable due to the absence of a statute enacting it. Given the benefits of the concept of construction liens, one wonders why Nigeria, a country growing at a tremendous rate, where real estate is on the rise has not adopted this concept which seeks to protect the contractor while encouraging economic development.

Furthermore, the Nigerian judicial system is slow and before unpaid contractors can recover their money, a lot of productive time may have been wasted. There is also the issue of the depreciating value of our naira which stalls economic growth and development.

Another consideration is the number of people involved in the construction business who actually need protection and prompt payments; these include bricklayers, architects, quantity surveyors, materials suppliers, engineers etc.

Escaping the Current Situation

There are instances where contractors can take advantage of construction liens. An example is where a right of a contractor to a construction lien is expressly stated in the construction contract. This is advisable because it guarantees the contractor payment for his labour and expenditure.

Another instance is approaching the Court to place a lien or encumbrance on the property. This will usually be done by filing a suit for breach of contract claiming for the unpaid fees. The contractor can ask for an interlocutory or perpetual order of the court, placing a lien on the property to prevent the property owner from disposing it or mortgaging it until the unpaid sums or Judgment sums are liquidated.

Since the Court has discretion on whether or not to grant the remedy of placing a lien on the property, it is advisable that contractors should insist on a construction lien clause being part of the construction contract. This is because it is settled Nigerian law that parties are bound by their agreement.

The Way forward

Construction lien is a creation of statute and to effectively utilise it in Nigeria, our legislators need to promulgate a law recognising and enforcing it or amend our existing real property and construction laws in Nigeria to accommodate it.

The benefits of construction liens are numerous and a developing Country like Nigeria needs to use the concept to its benefits. This will curb the excesses of recalcitrant property owners who wish to take advantage of the loopholes in the Nigerian legal system to deliberately refuse to pay sums owed by them to professionals who constructed the property.

Acceleration Claims in Kuwait

/1 Comment/in /by

Acceleration claims on a construction project defines the situation when work is performed at a faster pace than initially planned. In most cases, acceleration is needed to counteract accumulated delays and to meet the agreed completion date.

Acceleration can also occur when the contractor has a direct interest in seeing a project completed ahead of schedule – either by receiving a performance bonus or by relocating resources to another project. The contractor can accelerate work on a project by requesting its workers to perform overtime, by adding a new shift, hiring additional labour, subcontracting, or changing the sequence of activities.

Whatever method is chosen, it comes with extra costs that can or cannot be later recovered. Accelerating the project schedule is never free. In addition, when the acceleration is sudden, labour productivity decreases substantially because of fatigue or unfamiliarity to the project.

There are three types of acceleration that are different based on their causes: Voluntary Acceleration, Directed Acceleration, and Constructive Acceleration.

Voluntary Acceleration describes the situation when the contractor unilaterally takes the initiative of speeding up work on-site, without being previously asked by the owner to do so. This can result in costs that go beyond the original bid and which won’t be recovered unless the client is notified and agrees with the acceleration.

Reasons for a client to accept a voluntary acceleration mostly relate to the ability to generate revenue faster by selling, letting, or starting production, which can counterweight the increase in construction costs.

Directed Acceleration is the simplest and most straightforward case of speeding up the construction schedule. The client requests the contractor to accelerate work and pays for the acceleration costs. Such a situation won’t lead to disputes if parties agree on the magnitude of additional costs.

Constructive Acceleration is a situation that is not explicitly voluntary nor directed. Constructive Accelerations typically occur when the contractor is able to invoke an excusable delay such as design changes, added scope, extreme weather, site conditions that differ from bidding specifications, or force majeure events.

Owner-caused delays also qualify to justify a constructive acceleration, as well as any other factors beyond the contractor’s control that couldn’t be initially assessed as risks.

Each type of acceleration can lead to an acceleration claim. Voluntary Acceleration claims don’t entitle to extra payment unless agreed with the client. Directed Acceleration claims usually have a predictable outcome, as extra payment is granted to the contractor once an agreement is reached. Constructive Acceleration claims are the ones more prone to create a dispute.

The client might argue the contractor wasn’t entitled to accelerate, and the contractor might argue that accelerating the project was the only choice. Acceleration claims must meet a set of preconditions to constitute a reasonable dispute and grant compensation to the contractor. First, the excusable delay must be clearly identified.

Delays qualify as excusable only if they impact the critical path of the schedule. Second, the contractor must have made the request for time extension according to contract obligations and in a timely manner to accommodate a response. If the owner denied the request, thus implicitly requiring for project completion according to the initial schedule, it forces the contractor towards a constructive acceleration.

The final condition states the contractor must attempt an acceleration to counteract the delays caused by the excusable event and prove such action incurred extra costs.

As always, solving acceleration claims in a mutually advantageous way requires for communication between parties to be prompt and explicit. The difficulty of proving delays and associated acceleration orders highlights once more the importance of proper document management.

To give an example, the contractor is mistaken if they speculate a time extension won’t be granted by the client and act according to that presumption. What might have constituted a valid constructive acceleration becomes a voluntary acceleration in the absence of written client consent.

Another common issue regarding acceleration claims is when the granted time extension is insufficient. In that case, a contractor has to prove that the anticipated work requires additional time or additional cost compensation.

Lastly, acceleration is a topic that has to be addressed as early as possible in a complex project. It is always simpler and less disruptive to smoothly speed up works as they encounter the first signs of delays, instead of waiting for them to accumulate.

Former KPMG Adviser Makes Exit from Kier Group

/1 Comment/in /by

Kier Group has seen its Chief Executive Officer step down with immediate effect, following a coup in the construction company’s boardroom. Haydn Mursell, an accountant who began his career with KPMG, has been ousted as the company looks to commence a new era of growth, amid a United Kingdom construction sector that has struggled in the last year.

The British construction sector has endured a tumultuous 2018. Despite obtaining a sequence of lucrative public sector contracts throughout 2017, Leicester-based firm Carillion collapsed at the beginning of the year, sending shockwaves through the outsourcing sector as a whole.

Amid the chaos which ensued, Capita saw its share value slump repeatedly, while the first quarter of the year saw Serco suffer a 3.9% fall, alongside G4S and Interserve. This was particularly unhelpful for the beleaguered Interserve, as the group – also best known for its work in construction – was already grappling with poor trading and climbing costs. Kier was also impacted, and the first quarter saw a similar -1.3% fall.

The infrastructure services, buildings and developments and housing group bounced back after that, however. Recent key contract awards included the renewal of a three-year £70 million utility services deal in the South West and being appointed to three lots on the North West Construction Hub three-year £1.5 billion framework. More than £500 million of regional building projects were also secured during November and December, such as a major office development for Argent at King’s Cross in London, a research facility for the Pirbright Institute in Surrey, and a new hospital for Frimley Health NHS Foundation Trust.

The firm’s balance sheet was further strengthened on December 31 after the receipt of the £250 million net cash proceeds of the recent rights issue, and Kier remains on track to report a net cash position at the year-end. Despite this, however, board discontent has reportedly led to the exit of the firm’s long-standing CEO Haydn Mursell.

A chartered accountant, Mursell commenced his career with KPMG in 1995, before working at Bovis Lend Lease and then moving to the construction sector firm Balfour Beatty. He joined Kier in 2010, initially as Group Finance Director, before being confirmed as Chief Executive Officer just two months later. During his time in the role, he took on operational responsibility for the company’s property division.

With his exit from the firm, Kier has commenced the search for its new Chief Executive Officer, in a bid to steer the company into a fresh era of growth. Until this search is completed, Chairman Philip Cox will act as Executive Chair on an interim basis, working closely with the Chief Operating Officer Claudio Veritiero. They will jointly oversee operations for the time being.

Entrepreneurs Pledge Support for Construction Skills Initiative

/0 Comments/in /by

PlanBEE is a flexible training programme designed to attract and retain the brightest new talent in the region, plug skills gaps and create a more flexible workforce capable of working across various construction disciplines.

The initiative was launched in 2016 when Gateshead College and Ryder Architecture formed a powerful alliance with a network of architects, designers, contractors and engineering specialists.

Working with Gateshead College, the PlanBEE group has created a bespoke higher-level skills programme that provides budding professionals with study and off-the-job training at the college’s construction facility on Team Valley, along with a job working with some of the region’s leading companies.

It has been tailored specifically for and by the North East construction sector, providing students with a starting salary of £10,700 per annum, a professional qualification and a guaranteed job opportunity on graduation.

Established by Ryder Architecture, the initiative has already attracted some high-profile names, including Brims Construction, NBS, Desco, BIM Academy, Sir Robert McAlpine, Xsite Architecture, Robertson, 3e Consulting, Cundall, Arup, FaulknerBrowns, Sadler Brown Architecture and Tolent.

Chris Toon, deputy principal at Gateshead College, said: “It’s great to have three additional sponsors on board. The industry has called for employees to be skilled in a greater range of disciplines, such as surveying, landscaping, architecture and planning, and PlanBEE addresses this fundamental need.”

“We are proud to be at the forefront of an industry-led initiative that’s becoming a national exemplar for the recruitment and development of construction employees.”