What should I do if contractor insolvency occurs?
In the event that the worst happens and contractor insolvency occurs, there are a number of steps which the employer should take immediately:
- Confirm that insolvency has actually occurred and the type of insolvency (for example liquidation or adjudication) – actions taken based on rumours can have adverse consequences
- Secure the site and carry out an audit of the plant, equipment and materials present – this may extend to changing the locks on site in order to prevent overzealous contractors and sub-contractors seeking to return and take what they see as their possessions. The building contract may contain a provision that these are the employer’s property, but they can be difficult to recover if they are not within the employer’s possession – possession is 9/10ths of the law!
- Ensure that there are adequate insurance and health and safety arrangements in place for the site – these would usually be dealt with by the contractor and therefore may no longer be in place, so alternative arrangements may be required
- Ensure that any further payments to the contractor are stopped pending a more detailed review
- Consider whether any off-site materials have already been paid for and can be secured. This can however be difficult in practice where the materials are not physically within the employer’s possession
In addition, there are also a number of further actions which the employer should consider in the slightly longer term:
- Investigate the options available and ascertain the cost of completing the works to assist in deciding how best to proceed
- Consider whether termination of the contractor’s employment under the building contract is required, and if so take the necessary steps in accordance with the building contract
- Consider whether there are any bonds or guarantees in place upon which the employer can rely, and if so assess their terms as to whether and how to make a claim
- Make arrangements to complete the works – as a general rule of thumb the cost of completing the works may increase by around 30% if it is necessary to get a replacement contractor
- Consider whether direct payment to subcontractors is possible or desirable
- Although we would say this(!) we would strongly recommend taking legal advice, as insolvency and its implications are complex and it is easy to inadvertently fall foul of the various different requirements
Related FAQs
The amount an insurer charges for providing cover is a critical aspect of the underwriting process. The premium must be sufficient to cover expected claims but must also take into account the possibility that the insurer will have to access its capital reserve –it is risk assessment based and the greater the risk, the higher the premium. Historically, insurers of high-rise buildings would have only had to prepare for a loss caused by damage to just a few flats within a building. That is because the design and construction of that building, with the right materials and fire safety provisions in place, should have limited the spread of fire and allowed the damage to be contained –or at least make this an extremely low risk. Now we know that many buildings have been designed, built and signed off in a regulatory system that an independent Government review has found was not fit for purpose. Premiums will reduce overtime but will be dependent upon the perceived level of risk reducing as the regulatory regime, BSA and BSR become more established.
Failure to comply with the collective inform and consult obligations could impact on the fairness of any dismissals – see next question. In addition, a Tribunal can award a protective award of up to 90 days gross pay for each affected employee. The purpose is intended punish the employer for not complying with the obligations, not to compensate the employee for their individual financial loss.
Where a couple is not married, they have limited rights in relation to each other’s assets and these mainly relate to rights over property assets. There is complex Trust law which governs whether or not your partner could claim an interest in your property and it generally relates to where someone has invested in renovations on the property or promises have been made. If this is something you are concerned about, you and your partner could enter in to a Cohabitation Agreement. These Agreements can set out various matters, including who will pay the bills and where each of you would live if you separated. Most importantly, they can record your intentions about who owns the property and exclude any rights your partner would have against your property.
In recognition of the problems that the current situation is causing, the UK IPO classed the 24th March and all subsequent days as “interrupted days” which means that deadlines that fall within this period will be extended until the UK IPO declares that the interrupted days have ceased. As lockdown has begun to be eased, the IPO has now reviewed its position and has confirmed that the “interrupted days” period will come to an end on the 29 July 2020. This means that Thursday 30 July 2020 will be the first normal day of operation, therefore all “interrupted days” deadlines will expire on this day. Similarly, if your deadline falls after the period of interruption ends, this deadline will not be automatically extended.
The IPO is conscious that many businesses may still be in challenging positions when the period of “interrupted days” end. They will endeavour to continue to provide flexibility and support to assist businesses with their applications. They hope to temporarily remove fees for requests for extensions of deadlines, and will give further updates when this fee exemption is in place.
The IPO continues to encourage applicants to meet original deadlines where they are able. As their offices are closed, the UK IPO is not currently processing paper forms (i.e. hard copy) and faxes. However, they are processing forms which have been submitted electronically, or via email and have made a new email address available for the submission of forms.
Intellectual Property Offices covering other territories have made their own announcements about the extension of deadlines. The EUIPO’s period of extension of deadlines came to an end on the 18th May. However, they have published a Guidance Note and accompanying webinar on the EUIPO website, detailing options for parties who may struggle to meet deadlines and remedies for those who may have missed deadlines.
Data on properties, and people, has never been more important.
Given that compliance is at risk here, such a decision must be made by the Board to ensure good governance. Board approval should be sought and recorded for the approach the organisation is taking.
It is essential that you continue to record your data on compliance and report to your board at all times, and that there is a clear audit trail for issues with access, and if appropriate to the Regulator. Access issues as a result of self-isolation should be readily identifiable.
Operatives need to be provided with the tools to operate in as safe a way as possible:
- Checklist of questions to ascertain occupant’s current health
- Protective equipment (masks, gloves, over clothing)
The Gas Safe website is a useful resource for updates: https://www.gassaferegister.co.uk/help-and-advice/covid-19-advice-and-guidance/