The Law on European Construction Projects

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Assignment 3

the legal principles and requirements used when undertaking construction projects in Europe

Project Outline For the purpose of this assignment, the company that I have chosen will be preparing to buy a piece of land in the north of France and build houses upon it. The land already bares a barn and is from a private owner. The processes to buy, plan and develop the project will be described and compared to the system adopted by the UK. The intension is to sell the property for profit. The limited company is a medium size construction firm expanding its operating range to the north of France due to an irresistible opportunity. Contracts and ownership In France there are two types of contract available to buy real property. They are classified as: Promesse de Vente and Compremis de Vente (french-property.com, 2014)Promesse de Vente is a type of contract, offering the ‘option to buy’ that can only pass through a notaire where as a Compremis de Vente can be used without the overview of a notaire, from party to party. The obvious difference here is the Promesse de Vente has a safer image of protection, being passed through the notaire. Notaires or estate agents often have their own contracts that can be biased to one of the involved parties. The details of the contract are sewn into the clauses of the contracts. The Promesse Unilatérale de Vente means ‘Unilateral promise sale’ implying the parties’ dedication to the transfer of the price agreed. 10% deposit is usually taken and mortgages are paid to handle the remaining 90%. Property contracts have a 7 day cool down time after signatures where the offer can be retracted however the sale is final after this 7 day period. Within a contract there should be an adjustment clause stating; the buyer can execute the contract if the seller changes decision, (french-property.com, 2014). If the contract hasn’t got this clause and the seller changes decision, the buyer may only claim for damages. Most buyers wishing to develop the land chose a Promesse de Vente, which is the similar process to that in the UK. In The UK sales contract documents are transferred through third party who keep them in escrow. The third party, usually solicitors, collect the deposit of 10-15% to hold down and freeze a property. If the contracts are legitimate and both parties show the 5 basic elements of an agreement: offer, acceptance, consideration, intention, and capacity; a date will be arranged for completion. It is completion day when the money (consideration) is transferred, as are the keys and the deeds. The buyer is advised to register the property with the land registry in order to have the land in their name. This means that the responsibilities and rights to the land are transferred to the new custodian. The reason land registry exists is to find the limits of and quantifies the estate to be registered. The registration outlines the benefits and burdens of the land and assets. In the UK land is fundamentally held subject to the crown however, there are two main types of ownership in the UK: freehold and leasehold. Freehold is the absolute outright ownership of the land and property for an unlimited amount of time. Lease hold is more complicated. It involves a landlord, who has a freehold, leasing the land and/or property to a lessee. This creates a landlord and tenant situation with an agreed time span, usually ranging from 99 to 1000 years (Price, 2014). This acts as, theoretically, a temporary right to occupy the property. Sometimes, UK property leases will have attached restrictions and entitlements that may not be initially clear. Covenants are effectively special terms within the contract that are respectful of the land/buildings. These terms could become problematic and disputes usually occur. The main disputes are over what the tenant actually repairs and the severity of the repairs that are needed. Any disputes are usually referred to the Landlord and Tenant Act 1954. A property owner doesn’t want to give a tenant full rights, a licence to the land can be issued. These rights to the land would be less of that to a full tenure and can be revoked at any time for any reason. Property may also come with Easements attached that can allow the occupier to use the land for a particular reason, including business, or restrict another land owner the right to something. These include; a right of way, a right to a mineral or element and even the right to light. Easements are classified by the Ellenborough Park 1954 case as 4 features, to have a dominant and servient party, to be benefitting the dominant party and to be similar to existing easements. Otherwise a dispute may occur which could be resolved by referring to the Trust of Land and Appointment of Trustees Act 1966. For this project however a company would be buying the land with intent to develop. A company in France would create a SCI (Société Civile Immobilière), a satellite company, that would be fiscally transparent and this facilitates a stable ownership and transfer of the property. It acts in a similar way to a limited company and offers the same amount of protection. Operating a SCI also avoids inheritance laws, gives minor tax advantages and protects personal assets against creditors. So the obvious advantage of this is fiscal, however rights and responsibilities are limited to that of a company and personal responsibility in minimised. (french-property.com/companyownership, 2014) Planning of projects France: When planning a project in France a regulation body that must be referred to is the Les dispositions impératives du règlement national d’urbanisme (RNU) which translates as the National development regulations. These govern any developments to the property. Initially the Mayor (Marie) of the local area council will have to be notified and with full discretion may give the nod of approval, a formal submission to the RNU will be written. Formal planning consent will be needed if Change of use, habitable space (1.8m or more in height) and changes to the façade of a property. The restrictions in planning that are EU influenced are more legislation based, as with UK panning restrictions to disruption, structural tolerances, material choice and demolition - All of which are Governed by the EU through standards. In only October 2012, UK transferred all British standards and approved practices to European Standards and practices. Most EU planning systems are similar with a local council decision followed by an assessment of national statutory obligations and requirements. The national requirements will be mostly similar as they are governed by the EU policies on housing such as the Thematic Strategy on the Urban Envirnonment. UK: The main reason the UK uses the Town and Country planning act 1990 is to monitor developments and evolution of land. Section 55 underlines this perfectly as; “The carrying out of engineering mining building or other operations in, on or over the land, or the making of any material changes in the use of any building or other land” (Galbraith, 6th Edition 2011). When a design has been finalised it is presented to the local council planning institution and a decision is received within 8 weeks, 13 weeks for a large scale projects (due to the detail). The planning framework is laid out as stated in the Planning Act 2008 and decisions are made with Neighbourhood interest, material choice and the support and promotion of EU obligations and statutory requirements (DPLG, 2012). The public, by law, have to be notified of the plans and are not encouraged to scrutinise but to comment. There are 4 possible decisions that planning control can make: Unconditional permission of approval, conditional permission, Refusal of permission, refusal to take action. The most common are approval or refusal of permission. As the Company in question would be buying an empty plot with one small barn/shed with all building works to be done in the future, a long and strenuous planning process will inherently occur. The Marie will be consulted and proof of contributions must be shown to explain why a development would be beneficial to the area. This project would be restricted by the Local Councils discretionary decision and further more the nation legislation, with EU Influences and requirements such as materials, human rights living spaces and conditions, environmental policies etc. In the Design stages of the project, an architect will be consulted. Qualified architects in France are members of the l’ordres de Architectes, which is an organisation similar to that of the UK’s Royal Institute of British Architects (RIBA). This is obligatory if the Building is above 170m² (Architects in France, 2014). It is common procedure to write a standard contract between the Owner and architect, this called a contrat maître d’oeuvreorcontrat d’architecte. The Architects in France, to be a member of the l’ordres de Architectes, will have professional indemnity insurance and their work is guaranteed for 10 years against major problems, this is called an assurance décennal. If the planning of the project is refused on an architectural issue then the Architect is not legally entitled to be paid. Construction France The Parties involved in a French construction project are generally;
  • Contractors that govern the general construction works and procedures.
  • Architects are the fundamental designers and the customer contact reference for the project.
  • On larger scale projects, health and safety co-ordinators (coordonnateur de sécurité et de protection de la santé) are present to control risks of the project.
  • And the owner (maître d'ouvrage) who develops the property.
An owner may wish to enter an agreement or contract with a developer called a contrat de promotion immobilière that defines a final price and programme for the project. The owner may then wish to give the contract under a competitive basis to a contractor; this is a traditional method of contracting. An alternative is a design and Build contract, the contractor undertakes the overall architectural and construction works and has full liability for the project, as opposed to the traditional method where part liability is retained by the contractor. If the project is substantially sized then a form of temporary commercial organisation can be formed called a groupement momentané d'entreprises, which is made of two types of company relationship; a groupment solidaire that shares the liability between all contractors, and a société en participation that is an unregistered company that’s set up by a share holders agreement. Financial investors of the project also hold rights to step in to control the project if momentum is lost or contractors do not fulfil their obligations. If a contractor doesn’t fulfil their obligations then a breach in the contract will occur unless liability exclusion clauses in the contract, that relieve liability, have been included. Some obligations that cannot be included arefound in the Articles 1792 and Code Civil), which require three statutory guarantees to be provided by the contractor for events occurring after delivery:
  • garantie de parfait achèvement: this imposes an obligation on the contractor to make good any defect notified to him by the owner at the time of delivery or within one year of the date of delivery, whatever the nature or extent of the defect;
  • garantie de bon fonctionnement: this two-year guarantee affects all equipment that does not form part of the structure of the building but which could be considered movable, for example, ventilation or heating equipment. The contractor guarantees these elements are viable and do not impair the construction's main use;
  • responsabilité décennale: all contractors are strictly liable to the owner or buyer for ten years after delivery, for any defect hidden at the time of delivery that either compromises the integrity of the construction or renders it unfit for use. (Bonnard, 2014)
In France, EU member workers are permitted to work and follow standard employment procedure where as workers from other nations will have to apply for a temporary residency permit to work , a carte de séjour temporaire. Health and safety for French projects are controlled with European Economic Community regulations, the Directive 89/391/EEC implements the safety and health at work for construction employees. UK In the UK, construction projects can be governed and controlled by Construction Design Management regulations 2007 (CDM). CDM regs 2007 are generally implemented for Health and safety reasons however it is a reasonable procedure to follow. The client of the project should:
  • Check competence and resources of all appointees
  • Ensure there are suitable management arrangements for the project welfare facilities
  • Allow sufficient time and resources for all stages
  • Provide pre-construction information to designers and contractors
When a Contractor is chosen, a common form of two-way construction contract is chosen, there are many available and take a standard form structure. A common form is the JCT or Joint Contracts Tribunal. Specifically designed for the construction industry, it is a proven contractual way to identify responsibilities and liabilities. The design and build JCT contracts are useful as they provide a client to contractor agreement and a contractor to sub-contractor agreement. The contractors are responsible for the design and construction works and the client is responsible for laying out all requirements for a project. Alternatively contractors may often have the Architect work directly for the client, rather than sub-contracting them. All communications between the contractors and Architects can be uninterrupted by clients, however due to the payment method the contractor hands all design liability for the project to the architect. Project The French Project could involve the building of social housing or a public commercial (schools, etc), both of which may involve council or pubic partnerships, with the private company. These partnerships are called Public Private Partnerships, or PPPs. The 3 main forms the PPP may take are;
  • Traditional contractors arrangements where contracts are honoured and handed over
  • Long term administrative leases, between contractors and councils to occupy for a limited time
  • Social or government run contract partnership where the maintenance and repair work is managed by a public sector organisation. (Bonnard, 2014)
For this project, a traditional contractor’s agreement is appropriate. Architects, health and safety co-ordinators and a developer would be hired. This is a good idea as a design and build contract would be agreed upon, handing all liability of the project to the developer for the oncoming works. The developer would have to be a member of the Fédération Française du Bâtiment (FFB) translated as French Building Federation. This organisation works closely with the European Construction Industry Federation. Completion France When a project has been completed, the Contractor has 30 days to submit a project completion form (Déclaration attestant l'achèvement et la conformité des travaux). The form is entered to the local council, usually with the Architects signature and reflects the building works and design that were present in the approved planning application. Any changes that have occurred must be authorised before the completion form is handed in. The local authorities can intrude and assess the building works at any time through the project and after completion, the authorities can inspect the project for its conformity to the original plan. Without the completion declaration form, the client can be fined or the building can be returned to its original state if it doesn’t conform to the original planning documents. This puts the client under pressure to receive the completion declaration form from the contractor as soon as possible. UK In the UK practical completion is a fundamental stage for the contractor, this relieves immediate responsibility for the project. There are usually clauses in the initial contract that state that defects and repairs must be remedied until a certain time after the project. The client then usually takes over the works and responsibilities of the works, defects liability period begins and the responsibilities of damage are now passed to the client. The Jarvis and Sons v Westminster corp case states that Practical completion is finishing of all construction works to be done. project

Works Cited

Architects in France. (2014). Retrieved 2014, from French-property.com: http://www.french-property.com/guides/france/building/new-build/architect/contracts/ Bonnard, S. (2014). Construction in France. Retrieved 2014, from Uk Practical law: http://uk.practicallaw.com/8-502-1461?service=construction# DPLG. (2012). National planning policy framework. London: Department of Planning and Local Governments. french-property.com. (2014). Retrieved 2014, from Sale and purchase contract of property in france: http://www.french-property.com/guides/france/purchase-real-estate/legal/agreement/ french-property.com/companyownership. (2014). Retrieved 2014, from French property Company ownership: http://www.french-property.com/guides/france/purchase-real-estate/legal/company/ Galbraith, A. (6th Edition 2011). Building and Land Management for Law. Oxford: Elsevier Ltd. Price, M. (2014). Whats the difference between leashold and freehold. Retrieved 2014, from mypropertyguide.co.uk: http://www.mypropertyguide.co.uk/articles/display/10106/what-is-the-difference-between-leasehold-and-freehold.htm
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