Resolving common legal disputes in property development

August 23, 2023

There are alterative ways a dispute matter can be resolved rather than through the court system, such as mediation and arbitration. These methods are less expensive and less stressful.

Why do disputes occur in property development?

Property development projects are cash and time sensitive with multiple sub-contractor businesses involved in bringing the project to completion. If the project is not properly managed, disputes can arise. These include delays, dissatisfaction and disputed results at various stages throughout the project.

Common causes of dispute include:

• Associated loss and expense caused by delay or disruption to a building project – late payments and time problems will impact on the work schedule. This can therefore affect the earning potential of contractors and subcontractors
• Associated costs of carrying out additional works or variations under a contract – implications may arise which require variations or modifications. This will lead to increased costs, assignment of fault may be attributed for a range of reasons
• Boundary disputes – this can happen at any stage with party walls and infringement on property access
• Extensions of time – this can be caused for many reasons. When an extension is needed, there can be resistance from whoever commissioned the project and contractors involved
• General property damage – these occur when new build or renovation projects have completed but some aspects are damaged. This arises costs to repair
• Liquidated damages – some contracts contain penalties clauses. This means that if the time frame is breached, financial penalties can be raised
• Outstanding payments – often occur when funding stalls or costs more than anticipated
• Poor quality work or defective workmanship – quality of work can be disputed after the project is complete. Quality of materials may not be as the client expected.
• Post construction disputes – can occur over time. This includes cracks, damp etc

Alternatives to litigation

The quickest and cheapest way to settle disputes is through open communication between the parties. The parties should discuss the issue, provide evidence of their claim and seek a compromise that suits both parties. There are other options other than court such as mediation or arbitration which could be obtained if open discussions fail.

Mediation

Mediation is an interactive process which is structured in order to resolve disputes. This involves using the services of an impartial third party. Mediators are trained to deal with discussions calmly and effectively while different parties resolve their differences and reach a settlement. This is known as an alternative dispute resolution.

Mediators can be involved on an ongoing basis during a construction project. The key aim of mediation is to ensure the matter is resolved mutually, in a way that leaves a working relationship on good terms.

Arbitration

Arbitration is guided by someone with legal knowledge who is able to provide legal advice to the parties. The arbitrator will listen to both sides, assess the evidence and make a fair and equitable judgment. Both parties will agree to abide by the outcome in this process.

Litigation

Stage 1 – pre commencement of proceedings

Before commencing proceedings, pre action protocols and pre action conduct must be followed. The parties will need to establish the issues which are in dispute, share information available which concerns the issues and agree to intend to resolve these matters. Failure to follow protocol steps will usually incur a sanction for that party if litigation is proceeded.

Stage 2 – commencement of the claim

The first step to issue a claim starts by issuing a completed claim form served on the defendant to the County or High Court. The particulars of claim which discloses full details of the claim must also be served on the defendant. If the defendant wised to oppose the claim, they must file a defence to the court. Following this, the court will allocate the case to a particular “track” which is based on the money claimed.

Small track claims are allocated to claims of up to £10,000. Claims exceeding £10,000 and up to £25,000 are typically allocated to fast track. Claims exceeding £25,000 are usually allocated to multi track. High Court deals with claims which exceed £25,000 or more.

Stage 3 – interim matters

Once the case has been allocated a track, the court manages the case. The court will provide directions to the parties as steps which must be taken to prepare for trial with a strict timetable when each step must be taken. Small claims and fast track claims directions can be given without any court hearing. In multi-track cases, where the situation is complex, it is usual for a judge to meet with the parties as a so called case management conference in order to define the issues in dispute and determine what steps need to be taken in order to prepare for trial.

The most common case management directions are for:

• Standard disclosure – e.g. the parties list the documents in their possession which they intend to rely on or which are adverse to their case; and
• The exchange of evidence – occurs before trial and includes evidence which the parties intend to rely on (such as witness statements, expert reports etc)

Whatever track is allocated to the case, the parties will be working towards a known trial date or indication of when the trial will occur.

As well as case management directions, parties may apply to the court for any specific orders. This might include forcing an opponent who has neglected to take a required step in accordance with the timetable.

Step 4 – trial

Small tracks claim trials are informal and conducted at the judges discretion. Fast track and multi-track cases require formal rules of evidence to be applied.

At the end of a fast track trial, the judge will have resolved all issues (such as liability, costs etc). The judge will have the discretion to decide if any party should pay the other sides costs and if so how much. The parties must provide each other and the court with a detailed breakdown of their costs for this purpose.

The trial judge will decide who should pay costs on a multi-track case. Generally, the loser will pay for the other party’s costs. If the parties are unable to agree on the amount of those costs, they are determined by a costs judge who will conduct a detailed assessment on the case.

Stage 5 – post trial

Parties are entitled to appeal all or part of the judges decision on all track cases. In multi-track cases, the trial judge will award detailed assessment if the parties cannot reach an agreement.

The party who is awarded damages and/ or costs will be expected to have these paid by a date set by the judge.

If the party has not received their damages and/ or costs by this date then they will have to apply to the court to enforce judgement. This typically involves instructing court officials to attend the debtors premises and take their belongings to be sold at a public auction. The proceeds will then be paid to the party. It is therefore essential to check whether the party is worth suing at stage one before proceedings are commenced.

Avoiding disputes

Firstly, it is important to ensure that property developers engage in projects which are realistic and affordable. Make sure all agreements and discussions are documented and maintain project records scrupulously including receipts and timed reports.

It is also vital to manage the goals and expectations of everyone involved, especially any instructions or payment criteria. Your project management team must keep lines of communication open throughout, for clarity, accountability and agreement on project details, finances and any amendments required.

If you would like to discuss your matter, please call  0121 705 7571 and ask to speak to  a member of the Dispute Resolution team or emails us at litigation@wallacerobinson.co.uk.

Amun Sunner
Paralegal – Family and Dispute Resolution Departments

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.