The Construction Act 1996 states that parties to a construction contract have the right to refer a dispute to adjudication at any time.
This can be very useful, as it provides a mechanism by which the parties can quickly resolve disputes that arise during the course of the project. However, section 106 of the Construction Act 1996 says that the Act, and therefore the automatic right to adjudicate, does not apply where the contract relates to work being carried out on a dwelling which the employer intends to occupy as their main residence.
The Courts have held that the exclusion should be applied restrictively, such that it would not apply where:
- The construction work is being carried for a developer in the course of their business;
- The employer does not intend to live in the property when it is completed and / or intends to rent it out; or
- Only part of the construction works under the contract includes the construction of a building that the employer will occupy as a residential dwelling.
In the recent case of Howsons Ltd v Redfearn , the Courts have given further guidance as to when the residential occupier exclusion will apply. The Defendants had engaged a contractor to undertake works to a barn with a view to living in to upon completion of the works. The contractor subsequently obtained an Adjudication decision in its favour and took enforcement action against the Defendants. The Defendants challenged the enforcement proceedings on the basis that the Construction Act 1996 did not apply and that the Adjudicator had therefore lacked jurisdiction.
It was important to the case that the relevant planning permission had required that any residential use of the barn was to be ancillary to the business use. It was clear therefore that the Defendants were not using (and could not lawfully use) the barn for their main residence. The Courts consequently held that there was no lawful intention to occupy the barn and that the exclusion did not apply.
This case confirms that there must not only be an intention to occupy the property as a dwelling, but that such use must also be lawful in accordance with the applicable planning laws.