RICS response to Local Democracy, Economic Development and Construction Bill

16th December 2008

Multi Area Agreements

RICS supports the introduction of multi-area agreements (MAAs) as a way of improving working between local authorities and other regional partners. Many issues to do with housing, planning and economic development cross administrative boundaries and must be looked at in a more coherent way. In particular, this applies to major cities such as Manchester and Birmingham and multi-area agreements will be a first step towards the Government’s aim of creating city regions.

One advantage MAAs will have is the ability to tailor housing development to meet local demand. RICS recently sponsored a report into housing and city economies which (http://www.centreforcities.org/assets/files/08-07-08%20Home%20Economics%20Web.pdf) highlights the role MAAs can play in housing development. Ensuring housing development is linked to evidence based demand must be a key part of any MAA. This evidence base should be used to re-think housing markets across entire city regions. The report also argued that MAAs will allow local authorities to work together and pool housing and economic development funding across city regions. This must be encouraged to ensure the best use of resources.

Tenant Voice

RICS welcomes the strengthening of consumer protection and choice for social housing tenants in this Bill; however we remain concerned at the lack of regulation in the private letting sector.

As the Government responds to the Rugg review RICS seeks consideration of further enhancement to regulation and redress in order to protect private sector consumers.

RICS believes that it is the tenant that is important, not the origin of the service and seeks consistency in regulation and redress within the residential property sector as outlined in the recent review undertaken by Sir Bryan Carsberg.

Part 8 Construction Contracts

The provisions in the Bill relating to construction contracts follow a review into Part 2 of the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”). The 1996 Act introduced adjudication for disputes, notices of withholding payments and the right to suspend works into construction contracts.

RICS is pleased with the general approach taken but believe some changes should still be made to the Bill if it is to effectively meet all its intended policy objectives.

Several changes to the Draft Construction Contracts Bill recommended by RICS have already been accepted by the Government:
• Removal of a specific definition of “in writing” from the final Bill
• Placing the adjudicator’s power to make corrections on a statutory basis in England and Wales as well as Scotland
• Contractual provisions relating to adjudication costs will have to be made in writing after giving notice of intention to refer the dispute to adjudication rather than after the appointment of an adjudicator
• The power of courts to review adjudication costs has been removed

Clause 133 Requirement for construction contracts in writing
RICS support the repeal of section 107 of the Construction Act which makes the Act’s provisions applicable only to contracts wholly in writing. We are pleased that the separate definition of “in writing” proposed in the draft Construction Contracts Bill has been removed. The initial proposed definition would have led to more confusion.

Clause 134 Adjudicator’s power to make corrections
RICS is pleased that the Government has made the provisions of this clause applicable to England and Wales as well as Scotland as we recommended. Although a High Court decision established these principles in England and Wales, placing it on a statutory basis will prevent changes from a higher court and simplify processes for organisations and businesses working in Scotland as well as England and Wales.

Clause 135 Adjudication costs
Subsection 2 has been changed to meet RICS recommendations ensuring that contractual provisions are ineffective unless they are made in writing after intention to refer the dispute to adjudication. Parties should be free to agree such contractual provisions without review by the adjudicator, as long as agreement can only be reached after the service of a notice of adjudication.

We are also pleased that the court power to review adjudication costs has been removed. It is unnecessary for courts to have the power to review adjudicators’ decisions as to costs. Adjudication is a fast track, temporarily binding process and powers for the courts to review a specific element of decisions are unnecessary.

Clause 136 Determination of payments due
It is unclear what the proposed wording of subsection 110(1A) is trying to achieve. RICS believe that the proposed wording will not prevent “pay what paid”, “pay if paid” or “pay what certified” clauses being effective. As such it may not achieve the Government’s aims.

Clause 137 Notices relating to payment
Subsection 1 of Clause 137 is unnecessary and may give rise to an argument that part of the works executed is not provided for by the contract, for example a variation. RICS has heard of no reported problems with the existing wording “under the contract” and believe that this should not be amended within the Bill.

Clause 138 Requirement to pay notified sum
The whole of this regime to do with requirement to pay will become extremely complicated and as such is unlikely to be understood by users in the industry. If this Clause involves additional administration, it will increase costs for the industry and may in some circumstances delay payment without redress.

The Government must watch the impact on the industry closely to ensure that it does not cause excessive problems. Redrafting along less complex lines may be necessary at some point in the future and RICS would be willing to work with the Government to achieve this.

Clause 139 Suspension of performance for non-payment
The proposals in clause 9 reinforce and make the right of suspension of performance for non-payment more effective. Therefore, RICS supports the change in the Bill.

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