Shared & Halved - Property development

To support our clients and contacts who work in property development, Shoosmiths hosted a webinar on 7 April 2020 looking at the most pressing issues impacting the sector in light of the unique challenges posed by coronavirus COVID-19.

Introduction

Coronaviris COVID-19 is a crisis unlike any other we have faced as a country, presenting a new and varied set of challenges to UK and global businesses. Based on what you’ve told us is most pertinent to you in the current climate, we have devised a series of webinars aimed at you, business leaders, to look at implications of the outbreak. In this webinar we looked at property development. Below are our key tips and takeaways.

Introduction by Ian Fletcher, Director of Policy, British Property Federation

• Government wants construction to continue. Guidance awaited on how it can be done safely
• Biggest challenges are travelling to work, particularly in London, and safe distancing on site
• Developers finding it difficult to access materials. Manufacturers and suppliers still working to be signposted
• Meeting regularly with the Government on planning to keep this moving
• Already looking at recovery and how developers and contractors can get back to work

Do your construction contracts help you?

Force Majeure

• Don’t assume that COVID-19 is automatically a force majeure event but it may be depending on how it has impacted a development.
• Always look at your contract.  Force majeure may not be dealt with in it  but if it is, it may be able to help you.
• Unavailability of supplies as a result of COVID-19 could be a force majeure event

Suspension clauses

• Under an unamended JCT building contract there is no general right for a contractor to suspend a contract, other than for non-payment
• A contract can usually be terminated if it has been suspended for more than 2 months.
• If you cannot carry out the work by implementing social distancing rules, you could argue you are not unreasonably suspending the works in order to adhere to legislation

Extensions of time

• If an employer suspends or postpones work due to COVID-19, a contractor will potentially be entitled  to an extension of time and no liquidated damages will be payable.
• Delays in obtaining permissions from planning and building control and social distancing may entitle the contractor to an extension of time.

What work can be carried out on construction sites and how can you tackle possible reputation issues?

• Construction work can continue, but social distancing guidance must be followed
• Do what you can to follow the guidance on site and communicate with your employees to reassure them that as a business you are doing all you can to comply

Furloughing employees

• Furloughing should be agreed with each employee, it does not need to be a long process
• The Government and HMRC have the right to retrospectively audit decisions to ensure no abuse of the system
• Set out the impact of COVID-19 for reasons for the decision and make a record of the reason for furloughing

Are planning departments open for business?

• Councils are open for business, but there will be delays
• It may not be possible to carry out some assessments to progress applications, e.g. noise and traffic risk assessments.  Other reports should be reduced in length aid practical issues of downloading documents
• Appeals can be lodged, but cannot be progressed. However, you must still comply with statutory deadlines
• Decisions being made remotely by planning committees or delegated powers may not be if made before relevant regulations are brought into force.

Rent holiday

• What has been implemented is not a rent holiday but a moratorium on forfeiture of leases due to non-payment of rent. The moratorium currently lasts until 30th June, but could be extended
• Non-payment is still a breach of the lease
• Other remedies are still available to landlords e.g. sue  for payment and statutory demands
• A break clause may not be exercisable if the rent is not paid

Lending

• There are 3 broad areas of support from the Government: relief from current costs; new schemes to support borrowing; and existing schemes
• Look at all the options available to you and make sure you have a detailed business plan if you want to take advantage of the new schemes
• Consider approaching an advisor to help you put together a business plan on a success fee basis