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Modular housing being constructed

Modular builds in social housing

It is great to see more and more modular builds across the social housing sector. It feels that, rather than dipping its toe in the water, the sector has now positively embraced innovative methods of construction. However, are we running before we can walk? As construction lawyers, we draft a variety of contracts involving traditional build, modular build, and traditional interfaces with modular build. Whenever modular is involved, we are bombarded by a number of questions from our developer clients. We see the same recurring themes involving contractual risk, operational risk, and commercial viability issues.

The main issues we see include:

  • Logistics: This can involve delayed transport, unforeseen storage needs, roads and site gateways not being wide enough or bridges being too low. Whose risk is this?
  • Inclement weather: This might be delays or extra costs due to bad weather which, for example, might result in cranes not being able to place the units. Would extra time or money be available to the contractor?
  • Fire safety: Will the units be up-to-date and compliant with building regulations and fire safety rules? Further, does the contract allow the client regular inspections and signoffs at the factory? If these are missed, can the developer ask the contractor to open up at its own risk? We have written previously on this issue: modular construction and fire risks.
  • Services and utilities: What is the allocation of risks and responsibilities for these? How do they interface and integrate with others?

We also often deal with complex issues around:

  • Title of goods: When does it pass to the developer?
  • Risk/insurance of goods: Likewise, when does it pass? It might be different to title of goods.
  • Cashflow and payment issues: Often resulting in a combination of advance payment guarantees and vesting certificates.

There is a plethora of different commercial and technical issues to be discussed in the context of each modular project and captured in the contract. To top it all off, because there are so many variants with modular construction itself (different methods, materials, knowledge) there is no “one-size fits all” contract. However, with experience, we are becoming very conversant with the many issues modular build can bring and potential solutions to them (both commercially and legally).

In June 2021 our construction team ran a webinar where they discussed various commercial and operational issues in the context of previous modular contracts. Included were some good hints and tips on making modular projects viable. There were also some good myth busters highlighting the huge potential for green and low-carbon modular builds which, when used long-term and with planned low maintenance requirements, can be very sustainable in today’s ever conscious construction arena.

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