From small home renovations to major commercial projects, construction work often comes with its fair share of challenges. Legal disputes can arise at any stage, so knowing how to handle these issues is essential. If you're a homeowner or a developer, here are some of the most common construction challenges to watch out for.

Contracts

A well-drafted contract is essential for the smooth execution of any construction project. Any residential building work that costs over $30,000 requires a written contract. This contract must be appropriate and correct, detailing the scope of work, payment terms, timelines, and other critical aspects.  

Negotiating contractual terms can seem difficult but they will be your safety net in case of an unexpected event. In an industry like construction with so many moving parts, this is almost guaranteed. However, more planning in the contracting stage means less room for disputes later.  

You will want to consider topics such as who will be responsible for any increase in costs of materials, what will happen if there is inclement weather that slows completion and who is responsible for getting CCC?  

Understanding Your Contract 

You will want to ensure that your contract terms are clear and easy to understand. This is vital in avoiding disputes later and ensuring straightforward project execution:  

• Clearly define your scope of work: what is included or excluded.  
• Understand your pricing structure: a fixed-lump sum, labour only or cost-plus.  
• Know how provisional sums and cost escalations will be handled.  
• Plan for potential delays, for example, supply delays and extensions of time.  
• Prepare for potential penalties and dispute resolution methods: liquidated damages and alternative dispute resolution clauses.  
• Consider how money will be handled: retentions and the payment regime.  
• Make sure everyone is keeping thorough records for accountability.  
• Ensure all final steps are completed correctly: PCC, CCC and Final Payment Claims.  

Payment Regime  

Parties to a construction contract can agree to the way that payments will be made. However, parties are also able to make formal demands for progress payments under the Construction Contracts Act 2002 (“CCA”). This is called a ‘payment claim’. If the party receiving this disagrees, they can respond using a ‘payment schedule’.  There are many formal requirements specified in the CCA that must be met for payment claims and schedules to be valid.

Navigating Conflict Resolution 

Disputes are common in construction projects, but there are several methods to resolve them: 

• Negotiations: Direct discussions between parties to reach an agreement. 
• Mediation: A neutral third party helps facilitate a resolution. 
• Expert Determination: An expert in the field provides a binding decision. 
• Adjudication: A quick, interim decision by an adjudicator under the CCA. 
• Arbitration: A formal process where an arbitrator makes a binding decision. 
• Court: This is a last resort due to cost and time.  

Understanding these common construction issues and how to address them will help ensure your project runs smoothly. Always consult with a legal professional for specific advice tailored to your situation.