What is a declaration of trust, and what does it do?

It is almost impossible to completely guard against the risks associated with contractor insolvency, but there are some steps which can assist in mitigating and managing the risks involved.   To be in the best possible position, it is worth considering the following at the outset of any project:

• Check the contractor’s financial position – particularly the specific company which will enter into the building contract, as the employer’s rights will be against this company rather than the business as a whole
• Take legal advice to ensure that the building contract is properly drafted with appropriate provisions to deal with an insolvency event
• Consider requiring a performance bond and/or parent company guarantee (each serve slightly different purposes)
• Obtain collateral warranties from the consultants and sub-contractors involved, so that there are contractual rights against other parties if the contractor is no longer able to meet claims
• Consider requiring retention bonds, advance payment bonds or vesting certificates if necessary
• Project bank accounts and escrow accounts can also provide some further assurances for the parties involved

All organisations have underperformers. Capability is a potentially fair reason to dismiss and is separate to any redundancy procedures.

Generally, capability falls into either absences through illness or underperformance in the role. Those who are absent through sickness can be furloughed, but when furlough comes to an end they will need to go back onto sickness. If you are looking to tackle absence then you need to tackle long term and short term absence in a different way.

Long term absence: You need to establish whether the employee is able to return to work (with or without reasonable adjustments) in the medium term. This requires medical opinion and be careful of disability issues. Reasonable adjustments are likely to be important.

Short term absence: You will need to demonstrate that you have fair absence triggers in place and there is normally be a 3 stage procedure: warning and final warning followed by dismissal on notice. Each stage needs a fair procedure, with written information, a fair hearing and the opportunity to appeal. Be careful of disability issues.

As for underperformance: To tackle this, you will need to have clear SMART objectives in place and evidence of the employee failing to meet these. There would then normally be a 3 stage procedure: warning and final warning followed by dismissal on notice. Each stage needs a fair procedure, with written information, a fair hearing and the opportunity to appeal.

The immediate impact is accounting for payroll purposes for the additional cost of 13.8% employers NIC’s and 0.5% apprenticeship levy on top of the payment to the contactor’s PSC.

Secondary NIC’s cannot be recovered from payments due to employees and the same applies under the new IR35 regime. However, new terms can be agreed with reduced level of fees to reflect this additional cost.

The first point to note is that it is the position as at 14 February 2022 which is relevant, as whether or not a lease is a ‘qualifying lease’ for the purposes of recovering costs under the Building Safety Act was effectively frozen at that time.

If a leaseholder owned more than three properties in the UK (and the property in question was not their principal home) at that time, then the lease will not be a qualifying lease. The protections under the Act which prevent or restrict the landlord’s ability to recover the cost of remedial works through the service charge will not therefore apply to that lease (save potentially for the provision that costs cannot be recovered where the landlord is responsible for the defects, which does not expressly refer to qualifying leases).

The lack of a searchable database to assess how many properties a leaseholder has in the UK is however one of the difficulties to be resolved in this regard, as there is currently no way of searching the Land Registry to obtain a list of properties owned by one individual. The guidance appears to rely on the leaseholder completing the leaseholder deed of certificate being open and honest in this regard, and that deed of certificate being passed onto subsequent owners. Making false representations or failing to disclose required information in the deed of certificate may be a criminal offence, although reliance on this to discourage mis-reporting is clearly less satisfactory than having a searchable register.

Common law marriage is a term coined by the media for couples who have decided to live together but not marry. There is a common misconception that once a certain amount of time has passed in these circumstances, the couple will have rights to claim against each other’s assets in the event of a breakdown of the relationship but this is not the case. Unmarried couples have very limited claims against each other, and those relate to where children are involved (maintenance through the Child Maintenance Service and maintenance and capital claims through Schedule 1 of the Children Act) and properties. The latter is covered by complex Trust Law and can involve costly litigation through the Civil Court.

It is, therefore, extremely important to consider taking legal advice if you are moving in with your partner as you may wish to enter in to a Cohabitation Agreement or Trust Deed to ensure you have an interest in the property in the event of a breakdown, especially if you are making contributions to it. A Cohabitation Agreement can also set out what will happen in the event of a breakdown e.g. who will be able to live in the property and how long the other person will have until they have to leave. An agreement whilst together is better than trying to reach one apart, it can save time, heartbreak and costs if that relationship ends.