Six construction regulatory issues looming in 2020
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The first year of the new decade promises to be a busy one for construction, with new regulation looming that will affect most of the industry. Alexandra Buchanan looks at six key issues to keep an eye on.
A new regime for building safety
Following the government’s consultation document Building a Safer Future, a new duty-holder regime will be introduced to ensure that affected buildings are designed and built to be safe for residents. This will result in stronger enforcement and new sanctions (including criminal liability) for non-compliance. It will be complemented by a new competency framework, which was consulted on in the August 2019 paper Raising the Bar.
A new building safety regulator (BSR) will be responsible for overseeing the new regulatory regime, maintaining a register of in-scope buildings and inspecting buildings and safety information to ensure that duty holders and accountable persons meet their obligations. The BSR will also set building standards, advise government and promote competence in the building industry.
Construction and Regeneration Act 1996 consultation and cash retentions
In 2018, the government consulted on the cash retention scheme following the collapse of Carillion, due to long-standing cash flow issues in the industry. This ran parallel to the consultation to support the post-implementation review of the 2011 changes to Construction Act. Subsequently, Peter Aldous MP proposed the Construction (Regulations Deposit Schemes) Bill in parliament.
Despite considerable support, the bill never passed its second reading. But there is pressure on the government to act and provide statutory requirements for improving payment security.
“Another theme for 2020 is the drive to raise standards and quality in the industry through the introduction of licensing.”
Construction industry licensing and raising standards
Another theme for 2020 is the drive to raise standards and quality in the construction industry through the introduction of licensing. Some of the benefits of a mandatory licensing scheme include removing incompetent and rogue traders from the industry, driving up quality, professionalism and productivity as well as improving health and safety compliance.
A group of major construction industry bodies, including the CIOB, have formed a Construction Licensing Task Force, which they hope will lead to the development of a licensing scheme.
The Law Commission has confirmed that an electronic signature is capable of being used to execute a document (including a deed) provided the person signing the document intends to authenticate the document and any execution formalities are satisfied.
Electronic signatures are admissible in evidence in legal proceedings and, where a deed is to be signed “in the presence of a witness”, this still requires the physical presence of that witness – even where an electronic signature is used.
Developments in 2020 are likely to follow the commission’s recommendations regarding the setting-up of an industry working group to consider practical issues and a review of the law relating to the execution of deeds.
By combining the logic of contractual processes with the trust created by distributed ledger technology, a smart contract could smooth some of the friction in construction contracting and assist in incorporating BIM data, modern methods, and access to big data.
The convergence of advances in a number of construction technologies means that the long-discussed idea of automation of contractual decision-making is now ripe for fruition.
The VAT reverse charge
Implementation of the domestic VAT ‘reverse charge’ for the sector was planned for October 2019 but delayed until October 2020. Supplies between subcontractors and contractors will be subject to the reverse charge unless supplied to a contractor who is an end user.
The reverse charge will require changes to invoice accounting procedures as well as consideration of appropriate drafting in contracts for construction projects.
Alexandra Buchanan is a solicitor with Trowers & Hamlins