Where an agreement contains not only building obligations but also an option allowing one party to acquire a leasehold interest in the property once the development has been completed does the statutory adjudication procedure apply? The answer depends on whether the agreement is a "development agreement" or a "construction contract". This was the issue that was recently discussed in the Captiva Estates Limited –v- Rybarn Limited (in administration) case.
Where a contract is a "construction contract" then the parties have the right to seek adjudication pursuant to the HGCRA 1996. However, "development agreements" are excluded from the adjudication process.
This case concerned a contract relating to the construction of 28 flats and ancillary car parking spaces. The agreement also contained an option whereby the contractor could purchase 7 of the 28 flats once completed.
A dispute arose in respect of the contract and the contractor, Rybarn, wanted to refer the dispute to adjudication and tried to argue that the agreement was a "construction contract".
The Technology and Construction Court disagreed . As far as the court was concerned an option for the grant of a freehold or leasehold interest clearly fell within the definition of "development agreement". The fact that the agreement was, in effect, conditional in that the option could only be exercised as and when the units had been built was irrelevant. As far as the statutory definition is concerned a "development agreement" could be either a conditional or unconditional agreement.
Accordingly the agreement was a "development agreement" and the adjudication procedures did not apply.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 30/01/2006.
