In this guide, our business dispute solicitors will cover some of the main factors to be aware of when it comes to land and property development disputes, including what steps developers can take to avoid disputes, common causes of problems, legal options and considerations and the role of mediation, arbitration and adjudication as alternatives to court action.
Contents:
- What steps can developers take to avoid disputes?
- What are the common causes of disputes involving developers?
- What legal options are available to developers that want to resolve a dispute?
- What role do mediation and adjudication play in resolving developer disputes?
- What legal considerations should developers be aware of in international property projects?
- Summary
What steps can developers take to avoid disputes?
If you’re in property development, there are a few key steps that can be taken to avoid – or at the very least minimise – the risk of disputes happening. These include:
- Making sure that clear scopes of work are agreed: This is crucial so that everyone understands what roles and responsibilities each party has as the work is undertaken throughout the lifetime of the project. Everyone knowing what’s expected of them in terms of project deliverables and goals means that misunderstandings are less likely to crop up.
- Working on the basis of realistic time frames and costings: These should be clear and easily understandable to everyone involved in the project right from the outset, with guidelines put in place around what happens if timings or costings need to shift – something that’s increasingly common in the current economic climate, particularly if any of the goods or materials required for the project have to come from overseas.
- Using comprehensive and industry standard contracts: There are several different types of contracts used within land and property development and the right ones to use for your project will depend on the nature and scope of the work, but where possible, it’s always best to opt for industry standard contracts. This is because they include tried and tested procedures for dealing with any issues that may arise as quickly and efficiently as possible.
- Performing due diligence exercises on sub-contractors and other stakeholders: The importance of performing thorough due diligence exercises before any contracts are signed and work begins shouldn’t be underestimated. Knowing about who you’re working with before you do so can include carrying out full credit and reference checks and inspecting public records such as Companies House, as well as having conversations with those you trust in the industry to obtain personal recommendations: all of this can go a long way in reducing the risk of disputes happening in the long run.
What are the common causes of disputes involving developers?
Despite the best efforts of everyone involved, problems can unfortunately still arise. We’ve listed some of the common causes of disputes land and property developers can become involved in below:
- Construction-related issues: These can be vast in scope and can include factors such as delays with vital supplies for the project being received or with the work that’s been contracted out to sub-contractors causing a hold up in progress. It can also be the case that defects or quality issues are discovered once the project is underway, again causing delays while the issue is ironed out and alternative solutions are explored.
- Contractual difficulties: These can crop up for a whole host of reasons, including disputes over payments, confusion and misinterpretation around what’s expected from a party or multiple parties to the development and also around the termination of contracts – of which there could be several within land and property development.
- Disputes centred on the purchase of the land: There are lots of different issues that can come to light when the land in question is being purchased. Examples of these centre on rights of way, boundaries, easements and ownership of title to the land as well as environmental issues such as the land being contaminated. All of these can prove costly and time consuming to resolve, meaning that the start of the development can be seriously delayed.
- Financing-related disputes: Who is raising finance for each part of the work, the terms of the loan and what security is being given in return for the borrowing must be crystal clear to everyone involved before contracts for both the loan finance and the development works are signed. The scale of the problems that can be caused further down the line if this isn’t the case can be sizable.
- Problems with professional advice: It’s often the case that relying on advice from professionals such as surveyors, planning consultants, architects and property lawyers is a key part of the land development process. If you’re a developer and you’re given wrong or incomplete advice, you might need to make a professional negligence claim against the individual who’s been negligent, and involve their insurers, depending on the circumstances.
What legal options are available to developers that want to resolve a dispute?
The first thing to establish is whether you’re in a position to make a claim against another party to the project, or another party who’s been involved with it at some earlier point (e.g. giving you professional advice in the planning stages). A property litigation solicitor will be able to help you with this, but some of the main issues include looking at whether there has been a breach of contract, e.g. if a project milestone has not been achieved on time, if a payment deadline has expired and no payment has been forthcoming, whether there’s been a delay in receiving important supplies needed for the development works or if there has been any substandard or shoddy workmanship.
If you’re able to make a claim for any of these or other reasons, then the next thing to think about is checking how long you have to make a claim (this might be stated in the contract in question or if not, it’ll involve looking to what the law says on any deadline – otherwise known as a limitation period). After this, it’ll be a case of gathering evidence to start or ‘bring’ a claim if you decide to go to court and litigate.
Some of examples of what you might need to do to gather evidence to bring a claim includes:
- Gathering together all of your contracts and other agreements;
- Checking your internal case management processes and systems (whether data is held in computer software or in hard copies of notes taken by project management teams or other dedicated personnel) to show a log of timelines and communications in the form of phone calls, emails, letters and text messages between you and the party or parties involved in the dispute;
- Collating receipts and invoices;
- Interviewing staff members to obtain information that will be crucial for use in witness statements;
- Compiling any other evidence to demonstrate the loss you’ve suffered as a result of the dispute.
What role do mediation and adjudication play in resolving developer disputes?
The first step in thinking about alternative ways of resolving a land and property development dispute starts with the contractual documentation, because a properly drafted contract will define what the parties must do before they litigate, often court action will be the last resort. This means it’s usual to see what’s known as an escalation clause in the contract, which provides for disputes between you and the party or parties to the contract to be resolved in stages via the various levels of management within the respective organisations.
Sometimes, mediation can be a valuable and very effective way to resolve a developer dispute as the first stage of alternative measures. A neutral third party will facilitate discussions between you and the other parties with a view to a compromise hopefully being reached in the form of a settlement. The success rate for this is overall very good across many different industries and sectors.
Other common ‘next stage’ methods of resolving developer disputes are adjudication and arbitration. It’s typical in both the construction and land/property development arenas for a contract to state that adjudication is compulsory, because it’s a streamlined process that’s designed to find quick, practical solutions to an issue with a view to minimising disruption to a live project (an independent adjudicator has a maximum of 28 days to decide on a matter referred to them).
Arbitration is a widely-known method where the parties involved in a dispute agree to the process, usually in the terms of the contract itself. The process is overseen by an independent arbitrator, or panel of arbitrators, who is/are usually a specialist or specialists in the area that the problem is centred on, and the evidence is assessed before a final and legally binding decision called an ‘award’ is made. Arbitration is often specified as the dispute resolution process in the contract.
What legal considerations should developers be aware of in international property projects?
There are a few key considerations you need to be aware of if you’re involved in an international property development project. This is mostly because any contracts involving some of the parties being based overseas means several layers of complexity are added for the reasons outlined below:
- Being aware of which country’s law and jurisdiction governs the contractual relationship: This is central to remedying any problems that come up and as a general rule, it’s better for you if your contracts are governed by English law and jurisdiction – this is because it’s more straightforward from your perspective if an English court has the authority to deal with an issue.
- The need for local legal representation: Having a foreign lawyer in the country or countries where another party or parties is/are based can prove costly, but it can be worth its weight in gold in safeguarding your commercial position when it comes to understanding the local language, laws, regulations and customs.
- Awareness of the fact it’s likely that arbitration is very likely to apply to large-scale international projects: Arbitration is widely utilised in cross-border contractual relationships, so gaining some understanding of how this would work in an international development context by obtaining specialist legal advice is recommended.
- Considering how you’d enforce against a foreign contractor: If the relationship with a foreign contractor sours and leads to legal action, enforcing any award or judgment can be a complicated, long drawn-out process requiring specialist legal assistance from an experienced lawyer with international know-how. It’s worthwhile knowing this so that you can factor this potential additional cost into your budget – and your project’s timescales – just in case things do go wrong in this regard.
Summary
Land and property development disputes can be lengthy, expensive and complicated to resolve but with the right resources and support in place, the impact on and the disruption to the project can be minimised. Well-written contracts being put in place before any work begins is strongly recommended, as is having a team of lawyers with a proven track record of handling challenges and conflicts in your corner, are the best ways to obtain peace of mind that your commercial objectives are being well looked after throughout the lifespan of the project and beyond.
