Construction laws and processes affecting strata and community schemes
Recently, we have received various enquiries about construction laws, proposed design and construction contracts and building contracts especially those affecting strata schemes. Basically, complex construction works are needed to be done involving the owners/developers (more commonly called Principals in the realm of construction laws), architects, builders, subcontractors, surveyors, superintendents etc. What do all these mean? We cover some of the basic issues below.
The construction industry broadly involves 3 categories of works:
- Construction works (yes, you guessed it);
- Design and construction works; and
- Project/construction management.
Construction works
This is distinct from design and construction works in that construction is conditional upon the prior provision and settlement of the design. The Principal would engage an architect or a design team to prepare and provide detailed project design documentation including drawings and specifications. Then, the Principal would engage a builder separately to complete the design (who would usually sub-contract out various parts of the works including the necessary supplies). So, basically, the Principal would enter into an architectural agreement with an architect or architectural firm and then a building/construction contract with the builder. Depending on the complexities of the arrangement, the Principal would engage a superintendent to administrate the building contract. The role and scope of the superintendent works can be defined in the building contract. Sometimes, the superintendent can issue directions on behalf of the Principal. In other instances, the superintendent can have a certification role (however, please be mindful about a potential conflict as the certification requirements may need to be independent).
From experience, please make sure you actually engage an architect in the design phrase as they would be governed by NSW Architects Code of Professional Conduct. The use of the title “architect” is protected by law. Engaging a building designer, design consultant or design consultancy firm does not necessarily mean that the relevant works are prepared by an architect. Indeed, a building designer or design consultant may possibly not hold any qualification or experience to practice for a whole range of design works. So, be careful who you contract with in the design phrase. Check their qualification, accreditation and their licensing conditions.
Design and construction works
This category of works involve the Principal firstly engaging an architect or building designer first, to carry out the preliminary design of the project. This would assist the Principal in scoping out the project requirements. Then, the Principal would engage a contractor to complete the design and also complete the construction of that design (D&C contractor). So, the D&C contractor would take on more of the project risks and responsibilities. A superintendent can also be appointed by the Principal to administrate the D&C contract as discussed above.
There are variations of the 2 categories of works (above). For example, for the first category, the construction team can have an early involvement with the design team to allow for a pooling of their expertise and resources.
Design and construction management
This is more for complex projects where the Principals would want to have more control (and risks) of the entire design and construction process. Normally, the arrangement would involve the Principal engaging a project manager. Then, the Principal would individually contract, directly, with the design team, construction team and the individual sub-contractors etc. So, there is generally no head contractor.
The project manager would basically direct and manage all the other parties from project commencement to completion, and the project manager would normally be the superintendent under the individual contracts. The idea is that the breaking up of the contracts would make contract amendments, if needed, relatively easier (rather than amending a complex head contract). However, the management of the individual contracts would be more intensive.
Other comments
There are various standard contracts used for each of the 3 categories. For example, Standards Australia, HIA contracts and ABIC contracts. For smaller scale residential works, Fair Trading NSW also has various standard building contracts for work between $5,000 and $20,000 and also for work over $20,000. For strata buildings, lift replacement works, remedial or re-development works can vary. Some of the ones that we have seen are on a “costs-plus contract” (basically just means various materials and services are passed onto the Principal at cost). Regardless of which standard contract is used, special conditions are almost always used. It is too often too difficult to have the standard contract to cover all the relevant scenarios for a specific project. So, be sure to review those “standard” contracts carefully (they may very well not be appropriate for your project) and also requests for what you need in the special conditions, especially the core aspects of the project. Progress payments and the triggering events must be clearly defined. The devil is in the details!
More Information
Please contact our Strata law team at Matthews Folbigg Lawyers on 9635 7966 if you would like advice or assistance.
DISCLAIMER: This article is provided to readers for their general information and on a complimentary basis. It contains a brief summary only and should not be relied upon or used as a definitive or complete statement of the relevant law. Liability limited by a scheme approved under Professional Standards Legislation.
