CHC One Big Housing ConferenceCaroline O’Flaherty and Iwan JenkinsHugh James

Another fine messyou’ve got me into!

Section 104 Agreements

Troubled waters…

Legislative Background

• Water Industry (Schemes for Adoption of Private Sewers) Regulations 2011 (SI2011/1566)

• Transfer of existing private sewers and lateral drains

Adoption of New Sewers and Private Drains

• Section 42 of the Flood and Water Management Act 2010

• Section 106 B Water Industry Act 1991

Effect of Section 106 B

• Developer CAN NOT connect without a section 104 agreement in place

• Welsh Ministers standards

• Sewerage Undertaker must adopt the drain or sewer

Process

• Developer submits application

• Welsh Water’s engineer signs off

• Only when all information received will Welsh Water instruct legal

Process contd.

• Welsh Water’s lawyers issue agreement and confirm their costs

• Developer’s lawyers:• Review section 104

• Programme date• Drawing number/revision• Surety amount• Drawing colouring• Administration fees• Charity Act provisions

Surety Issues

• Cash?• Bank?• LABC/NHBC?• Welsh Government

Parties to Section 104

• Who should be the Developer?• RSL• Contractor

Decisions to be made

3 choices:

• Keep all the risk - Employer obtains S.104

• Share the risk

• Pass all the risk to the Contractor

Choice is communicated via the Construction Contract

Construction Contract Context –JCT D&B 2011 Definitions

Statutory Requirements

• Any statute, statutory instrument, regulation, rule or order made under any statute or directive having the force of law which affects the Works or performance of any obligation under this Contract and any regulation or bye-law of any local authority or statutory undertaker which has any jurisdiction with regard to the Works or with whose systems the Works are, or are to be, connected, including Development Control Requirements.

Construction Contract –JCT D&B 2011 Definitions

Development Control Requirements

• Any statutory provisions and any decision of a relevant authority thereunder which control the right to develop the site.

Contractor’s Obligations

• The Contractor shall carry out and complete the Works in a proper and workmanlike manner and in compliance with the Contract Documents, the Construction Phase Plan and other Statutory Requirements and for that purpose shall complete the design for the Works including the selection of any specification for the kinds and standards of the materials, goods and workmanship to be used in the construction of the Works so far as not described or stated in the Employer’s Requirements or Contractor’s Proposals, and shall give all notices required by the Statutory Requirements.

(Clause 2.1.1 of JCT D&B 2011)

Contractor’s Obligations

• The Contractor’s obligation to the Employer to comply with the Statutory Requirements under clause 2.1.1 shall not apply to the extent that the relevant part or parts of the Employer’s Requirements state specifically that the Employer’s Requirements comply with the Statutory Requirements. (Clause 2.1.2)

• The Contractor shall pass to the Employer all approvals received by the Contractor in connection with the Statutory Requirements. (Clause 2.1.3)

Options

• Communication in the Construction Contract is key

• Employer’s Requirements need to be clear on S.104 responsibility – Approval, process, timelines and costs

Time

Relevant Events

2.26.13 delay in receipt of any necessary permission or approval of any statutory body which the Contractor has taken all practicable steps to avoid or reduce

Time

Relevant Events

• Unamended JCT D&B - Contractor may be entitled to an extension of time in accordance with clause 2.26.13

• Options if risk profile is different:

• delete clause 2.26.13• changing “taken all practicable steps” to “used

best endeavours”

Money

Relevant Matters

Clause 4.21.4 delay in receipt of any permission or approval for the purposes of Development Control Requirements necessary for the Works to be carried out or proceed, which delay the Contractor has taken all practicable steps to avoid or reduce.

• Unamended JCT – Contractor may be entitled to loss and expense in accordance with clause 4.21.4

• Options if risk profile is different:

• delete clause 4.21.4• making clear that contractor will not be entitled

to loss and expense as a result of delay in receipt of S104 Agreement

Summary

• Clear position statement in Employer’s Requirements is vital

• Employer to obtain S104 – possibly amend JCT D&B

• Shared risk profile – Amend JCT D&B to reflect time/money implications

• Contractor to obtain S104 at their risk – Amend JCT D&B to reflect this risk profile

HORIZON GAZING

MINIMUM ENERGYPERFORMANCE STANDARDS

LEGISLATION

• Energy Act 2011

• Private Rented Sector Minimum Energy Efficiency Standard Regulations (Non-Domestic) (England and Wales)

• Private Rented Sector Minimum Energy Efficiency Standard Regulations (Domestic) (England and Wales)

When will the regulations come into force?

• 1 April 2018

• Phasing• New leases 1 April 2018• Backstop 1 April 2023 (Non-Domestic) or 1 April

2020 (Domestic)

Impact

• You cannot let a property where the EPC rating is worse than E

• TSO’s enforce

• Penalties

Exemptions

• Lease < 6 months – but only with one renewal to the same tenant

• Leases > 99 years

• Green Deal assessment and measures implemented if any

• Consent not available

• Consent given but conditions unreasonable

• Upgrade reduces the value of property

Issues

• Availability of Green Deal• Inaccurate EPCs• Tightening of building regulations with time. A

building with an E rating today is likely to be an F rating in 2018

• Leases• Tenants resisting dilapidations• Tenants demanding changes to pre-let design to

improve EPC rating• Rent discount/incentives to renew• Service charge recover

• Pre-acquisitions due diligence• Refinancing• Cost of upgrade

Practical Points

• Ensure you have accurate EPC assessments

• Identify stock which is at E and below

• Put in place an Energy Efficiency Plan to assess cost and benefits of improving energy efficiency and weigh against disposal

• Energy Efficiency Measures part of planned maintenance

• Consider drafting leases

CDM 2007

• The Construction (Design and Management) Regulations 2007 (SI 2007/320) (CDM 2007) are a key piece of health and safety legislation affecting construction and engineering projects, and property development.

• On 31 March 2014, the Health and Safety Executive (HSE) launched its long-awaited consultation on proposed changes to the CDM 2007.

The consultation and its key suggestions

• The HSE’s key proposals include:

• Simplifying the CDM 2007, with less duplication and a structure that follows the process of a project.

• Replacing the CDM 2007’s lengthy ACoP with targeted guidance that is easier to understand and includes template documents to help small businesses.

• Replacing the role of CDM co-ordinator with the role of “principal designer”.

The consultation and its key suggestions

• Removing the competence requirements of regulation 4 of the CDM 2007 and replacing them with a general requirement to ensure appropriate information is made available, instruction, training and supervision.

• Changing the threshold for appointment of co-ordinators (the principal designer and principal contractor), so that they must be appointed whenever there is more than one contractors on a project.

• Construction phase co-ordination remains with the Principal Contractor.

Outcome of HSE Consultation –September 2014

• The report recommends proceeding with the new regulations, so that they come into force in April 2015.

• Most of the new regulations will remain as originally drafted, but the HSE has agreed to clarify its drafting on:

• The transitional provisions• Replacing the CDM’s 2007 competence

requirements with a more general framework.• The new regulations are accompanied by a new

Approved Code of Practice (ACoP), rather than guidance.

New EU Directives

In February 2014 3 new EU Directives were adopted:

• Directive on public procurement (“New Public Sector Directive”)

• Directive of procurement by entities operating in the water, energy, transport and postal services sectors

• Directive on the award of concession contracts

• New Public Sector Directive out to consultation by Cabinet Office. Closes on 17th October 2014

Key Drivers and Aims

Drivers

• Europe 2020 strategy

• Codifying significant judgments

• Evolving political, social and economic context

Aims

• Simplify and increase flexibility

• Supporting common societal goals

• Increased access to publicly awarded contracts for SME

Key Changes

• New Timescales

• New Procedure – Competitive Procedure with Negotiation

• Establishment of SME friendly measures

• Past performance

Key Changes

• Abnormally low bids

• Variations

• Social and environmental policies