RECENT DEVELOPMENTS IN THE CONSTRUCTION INDUSTRY IN KENYA


 

A. National Construction Authority (Defects Liability) Regulations,2020

The Cabinet Secretary Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works on 8 April 2020, issued the National Construction Authority (Defects Liability) Regulations, 2020 (Regulations).

I. Scope of the Regulations

The Regulations regulate defects liability provisions in construction contracts for commercial buildings by requiring the inclusion of patent and latent defects liability period provisions; prescribing minimum defects liability periods; requiring mandatory insurance cover for the contracting parties; and re-defines when practical completion occurs. Consequently, contracting parties will no longer have the discretion to set their own defects liability timelines and will have additional obligations once the Regulations are effected.[1]

The Regulations will only apply to commercial buildings which are defined as ‘premises occupied wholly or partially for the purposes of trade or business or for the purposes of rendering services for money or money’s worth’.

II. Practical completion and minimum statutory period for defect liabilities

Notably, the Regulations have introduced a fundamental change in the definition of practical completion. The standard form Joint Building and Construction Council (JBCC) Contract and common industry practice have traditionally defined “practical completion” as having occurred once a certificate of completion has been issued by the project architect. However, the Regulations have now defined practical completion of a commercial building as occurring once a certificate of occupation has been issued by the relevant county government.

Moreover, the defects liability period in relation to patent defects period will now have a minimum statutory period of twelve (12) months from practical completion while latent defects period is six (6) years from the completion of the patent defects liability period.

III. Requirement for mandatory insurance cover

It is also instructive to note that the Regulations now mandate the contracting parties to take out insurance cover as follows:

  1. the contractor, insurance cover for any latent defects;
  2. a sub-contractor, insurance cover for any latent defects;
  3. relevant professionals (engineers, quantity surveyors and architect), professional indemnity cover for any latent defects; and
  4. owners of commercial buildings, insurance cover against structural damage attributable to the owner.

IV. Practical considerations

Pertinent issues that need to be addressed before the Regulations are effected.

Scope of regulations - The rationale behind limiting the Regulations to construction contracts in respect of commercial buildings only is not clear, as defective work can occur in both commercial and residential construction projects.

Sectional completion of works - The Regulations also do not appear to have taken the common industry practice of sectional completion of works into account.  The effect of this would be that despite the owner having accepted the works, the construction risk will remain with the contractor, sub-contractor and the relevant project professionals, therefore discouraging such practice.  This may prove impractical for large construction projects.

Potential delays in issuance of certificate of completion - A time lag will likely be experienced between the period the contractor and architect actually complete the works and the issue of a certificate of occupation by relevant county government.  This will again result in the contractor and sub-contractor having to bear the risk during this period and result in high costs since their respective performance bonds will have to cover this additional period.[2]

Mandatory insurance and professional indemnity covers – This new requirement will result in an increase in construction costs as they will be ultimately borne by the owner.

Certification of rectification of defects by owners – Post rectification of defects, a contractor typically notifies an architect in writing that rectification works have been completed and the architect inspects the works and issues a certificate of rectification of defects/make good certificate. In contrast, the Regulations now provide that the owner (who may not be qualified in this regard) would be the party now certifying the rectification of defects.

Public consultation - We note that the Regulations have not been well received by industry players and extensive public consultation was not undertaken.  Had this been done, perhaps some of the concerns highlighted above, may not have arisen.

 

B. Standards for Management of Construction Sites and Workers

The National Construction Authority (Authority) in line with its core mandate of advising and making recommendations to the Cabinet Secretary on matters affecting the construction industry, issued guidelines in view of the Covid-19 pandemic.

The Standard for Management of Construction Sites and Workers Guidelines were issued in April 2020 that must be adhered to at all construction sites (sites). Cognisant of the vulnerability of construction workers and the risk of exposure at the sites, below are some key measures that are now in place:

  1. sites are mandated to have an occupation safety officer sensitised on Covid-19 and whose name (s) must be submitted to the Authority;
  2. body temperatures of all site workers are to be taken at the point of entry and on leaving the site;
  3. administrative controls must be put in place by contractors for purposes of ensuring minimal human traffic and social distancing at the site;
  4. entry systems that use finger prints must be removed;
  5. protective personal equipment must be provided to all workers at the site;
  6. hand cleaning facilities must be in place at the point of entry;
  7. workers’ wages are be paid via mobile money or online bank transfers; and
  8. all sites must be closed by 4:00pm.

Contractors must therefore ensure strict adherence to the guidelines provided by the Authority and by the Ministry of Health from time to time.

To access the full version of the guidelines see the following link.

Article by Hamida Abass

Hamida is an Associate in the Commercial Practice Group. She has diverse experience in commercial, corporate, banking and finance, real estate law and projects.


[1] Section 42 (3) of the National Construction Authority Act, requires the Cabinet Secretary to table all regulations before Parliament for approval before such regulations become effective. As at 14 August 2020, we are not aware of the tabling of the Regulations before Parliament.

[2] A contractor is normally required to provide a performance bond issued by an employer approved bank or an insurance company to guarantee the contractor’s performance under the contract.





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