The Government released the first draft of the new Local Democracy Economic Development and Construction Bill (the "Bill") in July 2008 in an effort to update the existing Housing Grants Construction and Regeneration Act 1996 ("HGCA") as it was lacking in some key areas. In fact, the Government stated:

"Extensive consultation with the construction industry has identified that while the Construction Act has improved cash flow and dispute resolution under construction contracts, it is ineffective in certain key regards."

Progress

The Bill had its first reading in the House of Lords of 8 December 2008, second reading on 17 December 2008, and passed through the committee stage (a line by line reading of the Bill) on 3 March 2009. The Bill is set to begin the report stage (a further line by line examination of the Bill) on 17 March 2009. After this there will be a third reading in the House of Lords before the Bill moves to House of Commons. Depending on the amendments suggested in both Houses and the difficulty in getting agreement on the text, the bill may take some time to progress through all the stages. Once agreed by both Houses the bill is sent for Royal Assent.

Key areas

The key areas which the bill will cover are mainly concerned with dispute resolution and payment mechanisms. An example of proposed amendments are as follows (this list is not comprehensive):

• proposal in December to amend the provision that all contracts had to be in writing as defined by the HGCA, meaning that all construction contracts would be subject to adjudication;
• changes to the procedure regarding withholding notices and suspension of works;
• outlawing the conditional payment clause (more usually known as "pay when paid") in construction contracts.

So far, the proposed clauses have met with mixed reviews from the construction industry as a whole, with many contractors feeling that smaller sub contractors have been unduly favoured. The full extent of the draft bill will ultimately be known when the text has been agreed by both Houses, which is expected to be by the end of this year.

If further information is required then please contact Sadie Fairfax by telephone on 01865 262 627 or by email. More updates will follow.