Accommodating Delay: Dealing with delays to purpose built student accommodation

A recent BBC report identified at least 22 private student blocks in the UK (almost a third of those being built) were delayed at the start of the 2019/20 academic year resulting in the universities minister calling for a summit on the issue.

It is important to know what steps may be available to mitigate the effect of such delays, whether you are a private developer of purpose built student accommodation or a University in search of a contractor to build accommodation on your behalf. We have summarised a few of the options below:

1. Liquidated Damages – One option is to include a liquidated damages or LADs clause as an alternative to relying on a general damages claim where the precise loss to the University (rather than for example its students) has to be proven. This allows a claim for a pre-agreed amount from the contractor for each day (or week) that the project is delayed beyond the planned completion date. A benefit of liquidated damages clauses is that they provide certainty to both parties about the financial impact of a delay. However, the amount which can be claimed will be a point of negotiation and a higher amount may lead to a higher construction price.
2. Alternative Accommodation – A provision which requires the contractor to provide alternative accommodation if the accommodation is not ready on time, can be included. The provision should specify the requirements that the accommodation must have in order to be deemed “suitable” (e.g. quality, location and amenities).
3. Early Warning Notices – Whilst not providing a remedy, a requirement to provide early warning notices as soon as the contractor is aware of an issue which may cause delay can allow the employer to putting contingency plans and steps can be taken to address the issue sooner rather than later. However, the success of such clauses relies on co-operation and clear and open communication between the employer, the contractor and the project manager which may not always be the case.
4. Programme Due Diligence – Practically, it is important that thorough due diligence of the contractor’s programme has been undertaken. It will be important to consider how much float the contractor has built into the programme, the time of year in which it intends to carry out certain work and whether the timelines given for completing the work are realistic.

Practical Tip

Whilst LADs and alternative accommodation clauses can help to mitigate the impact of late completion, these are unlikely to address the reputational damage suffered as a result of failing to deliver. It is important to ensure that the procured contractor has a proven track record of delivering such projects and informs of any potential delays to provide a full opportunity to mitigate its impact.

Mills & Reeve is one of the market leading legal advisors in the purpose built student accommodation market and has worked with universities, private sector providers and funders to deliver many successful projects over the last 15 years.

Written by Greg Fearn