Our regeneration article series has already highlighted the increased focus on developing our city centres, and in particular encouraging greater residential population in cities such as Glasgow, Edinburgh and Aberdeen. Changes in the retail and office market have meant there is greater availability of vacant buildings, which can be repurposed for, or replaced with, residential developments. As a result, there is a recognised build to rent boom across cities in Scotland, with many more developments expected in the pipeline.
With this increased drive in city centre development and regeneration comes considerations for the construction sector, and in particular for contractors and developers.
Brownfield Site Considerations
Whilst brownfield sites may come with benefits in terms of existing infrastructure such as road networks and drainage etc, they can also come with inherent underlying risks such as contamination and other site or ground related issues. As such, developers may be required to expend greater costs at the outset of a development project on a brownfield site to fully ascertain its condition and suitability (e.g. commissioning ground investigations and/or geotechnical/geoenvironmental assessments) and to carry out any remediation work required.
When developers come to procure a contractor for development works, factors such as the location of the site, its condition and also the allocation of site and ground condition risk under the proposed terms of the construction contract can all have a significant impact on pricing. Quite often there is a lot of commercial discussion around these matters, with developers ideally looking to pass the risk of site and ground conditions on to contractors – a position which is also pushed for by development funders.
It is imperative that developers ensure they have a contractual means to procure reliance letters in respect of any such reports and surveys commissioned. These are very often required by development funders and also contractors who are taking on site and ground risk under a construction contract.
Modular Construction
Offsite modular construction is becoming an increasingly popular method of construction, particularly for residential developments in city centres. This method typically involves constructing significant parts of a building in modules offsite, usually within a factory, before delivering those parts to site for installation. It has been identified as a means of overcoming difficulties in construction in densely populated areas where construction on site is difficult or impractical, and also a means of quick delivery.
It is important, however, to consider the risks of using offsite modular construction and how this can be effectively managed. The primary risks to a developer include contractor (and sub-contractor) insolvency and damage to goods and materials whilst they are being manufactured or held offsite. Developers should consider the use of Offsite Materials Agreements, the suitability of the insurance arrangement in place and also perhaps the use of Advanced Payment Bonds. These are discussed in more detail here.
Neighbouring Properties
Carrying out works in a dense urban environment usually requires working within close proximity to other buildings and this brings with it a number of considerations, including noise pollution, trespass and the oversailing of tower cranes.
The terms of any construction contract should clearly set out the developer's and contractor's obligations in this regard. Typically there is a contractual obligation on the contractor to prevent nuisance and any other interference with the rights of adjoining or neighbouring landowners when carrying out works, and to indemnify the developer against any loss etc suffered as a result of breach. Historically developers have also looked to pass responsibility for procuring any consents/approvals from neighbouring landowners on to contractors, as well as responsibility for procuring any oversailing licence required. This is becoming less common in our experience, with more contractors pushing this responsibility back on to developers who are more likely to have the commercial relationship with neighbouring landowners to facilitate such arrangements.
Infrastructure Considerations
Good transport links are key to city centre living, and so many city centre development sites are in close proximity to railway lines. Developers, therefore, need to think about any interface between the development works and nearby railway infrastructure, as well as the road infrastructure surrounding the site.
A railway network owner will require that developers working within close proximity to railway infrastructure enter into a contract setting out detailed asset protection provisions with a view to securing the integrity and safety of the railway infrastructure and assets – these may take the form of a 'Business Asset Protection Agreements' (BAPA) or 'Asset Protection Agreement' (APA). Early engagement with a railway network owner is key for the smooth running of any development. A prudent developer will seek to pass down many of its obligations under any BAPA/APA to contractors working on a site in so far as possible - this requires careful consideration and drafting of the construction contract and sub-contracts.
Developers may also be required to liaise closely with local authorities regarding necessary road closures and other interruptions to road networks as a result of the delivery of goods, materials and/or equipment, or otherwise as a result of the carrying out of the works.
Programming
The sequencing of works may be particularly important on small city centre sites where there is not a lot of room for on-site storage and activities. It may be only certain elements of the works can be carried out at certain times and in parallel with one another and, therefore, these practical considerations should be clearly thought out by developers, their project managers and contractors. Consideration should be given to the need for a more detailed programme or perhaps even the use of sections under construction contracts to stagger elements of work.
At Brodies we are acutely aware of the challenges which developers and contractors face when working on city centre development sites, and the importance to the smooth running of a development project for these factors to be considered, effectively managed and documented at the outset of a project.
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