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State tightens noose on shoddy builders

By Allan Mungai and Peter Theuri | May 21st 2020

Building contractors are in a tight corner following new regulations that make them liable for defects in projects for at least seven years after the construction is complete.

The National Construction Authority (Defects Liability) Regulations 2020 introduce a latent defects liability period for commercial buildings and gives owners up to seven years to recall contractors back to site to rectify flaws in projects.

The regulations gazetted by Housing and Urban Development Cabinet Secretary James Macharia in April also increase the defects liability to a minimum of 12 months.

Defects liability period, as defined in the notice, is the period after the construction of a commercial building has been completed up to handing over during which a contractor may return to the commercial building to remedy any patent defects.

Building owners now have at least a year to call back contractors to rectify flaws in the work. Some of these flaws include cracked plaster or issues with the paint.

Once the patent defects liability period is completed, the owners will have at least six more years to have the contractors rectify structural flaws that were concealed during the construction.

While previous contracts for the construction of commercial buildings only stipulated a patent defects liability period, Legal Notice 64 of April 2020 now also makes it compulsory for contracts to prescribe a latent defect liability period.

But the regulations are already raising hackles within the construction industry.

Sector players say that while the regulations are intended at assuring the quality of construction projects, they are far off the mark and will, among others, increase the cost of construction and make the contractors wait longer for their payment.

For instance, the regulations make it mandatory for contractors and sub-contractors to be insured against latent defects that may become apparent during the liability period, while architects and quantity surveyors should also have indemnity cover for latent defects.

However, the new regulations only apply to premises that are built to be occupied for business. 

Gilbert Josiah Mungu, a lawyer in Construction Law and Arbitration, said the law should apply to all construction contracts except those with a residential occupier.

“The idea that the regulation only applies to commercial buildings does not seem to be informed by commercial necessity geared towards reviving the construction industry and the application of National Construction Act, 2011,” he told Home & Away.

He further said that the timelines for rectification of patent defects do not make business sense and would only serve to have the contractor wait longer for the final payment.

The contractor, he added, would also not be entitled to a final certificate of completion, which is a condition precedent to being paid.

“Those defects are readily identifiable and should be dealt with immediately. Having a period of not less than 12 months to carry out the rectifications is not practical,” said Mr Mungu.

“These aspects of construction are always handled by the architect who, as the supervisor of the construction, knows the period of time that it would take to make them good and such timelines are always consensual between him and the contractor.”

Commercial property lawyer Alex Njage said the regulations are fatally flawed and wrongly redefine concepts that have been used internationally for decades.

“They seem to be legislating for defects liability in relation only to commercial property. I’m not sure what the rationale is, there was no public participation,” he said.

Stakeholders in the industry are concerned that the definitions in the regulations vary from those contained in JBCC contracts which are used in local private construction projects.

Mungu took issue with the definition of ‘practical completion’, which the regulations say will only be decided by the issue of a certificate of occupation by the county government.

“Having the county government play a pivotal role in its definition is only opening opportunity to corruption and also needlessly undermining the important role played by the architect,” he said.

The issue of redefinition of terms has also been raised by the Institution of Construction Project Managers of Kenya (ICPMK), which is demanding that the government suspend the regulations.

ICPMK Chairman Tom Oketch said deferring the regulations would allow for wider negotiations and participation by stakeholders in the construction sector to ensure that the regulations are aligned to “other laws and practices in the industry”.

In a letter addressed to CS James Macharia, Dr Oketch said the stakeholders affected by the notice had not been part of the public participation before publication of the gazette notice.

“This Gazette Notice has solicited considerable concerns from our members, other construction professionals and stakeholders in the construction industry,” says Oketch in the letter dated May 18.

“Unfortunately, it would appear that we, together with various other stakeholders in the construction industry, missed the opportunity of public participation, which is envisaged under the Statutory Instruments Act, 2013, Laws of Kenya.”

Besides the definition of terms, the body is concerned about the increased patent defect liability period and a conflict between industry rules and government regulations.

Oketch said the regulations completely disregard situations where the completion certificate and handover are done at the same time, or when the certificate gets issued after handover.

He also raised issue with the regulation being focused only on commercial buildings.

“This definition appears to leave out other buildings which have big structural components such as owner-occupier houses, buildings by not-for-profit organisations, churches, temples and mosques, social halls and legislative buildings like parliament and county chambers and administration offices, and all government buildings,” Oketch told Home & Away.

“Is it necessary or wise to limit defects liability period, whether latent or patent, to commercial buildings?”

He said this length of time will get professionals uncomfortable and will negatively impact insurance agreements while increasing costs incurred on professionals in the industry.

The ICPMK chairman also feels that most of the definitions in the Gazette Notice are unclear. He said there should be a synchronisation of laws, not imposition of regulations on the industry without proper consultations, as dealers in the industry are bound to standard forms of contract.

Nyagah Kithinji, a quantity surveyor, raises issue with the requirement that a sub-contractor be liable for the rectification of patent defects that become apparent during the patent defects liability period.

“There is a very serious issue here. What will the contractor, professional and sub-contractor be liable for? The liability is not defined or divided. It means that the persons named are jointly and severally liable for all the defects that may occur,” he said.

“The architect, quantity surveyor or engineer may find themselves replacing a roof as consultants.” 

He said the notice makes an error by treating the building owner as an expert, and converting professionals into contractors and making them liable for defects against all known cannons of practice in the industry the world over.

Since professionals are not registered as contractors, Mr Kithinji said, they will have to employ registered contractors to rectify defects

“We wish to raise our concerns at this early opportunity that the regulations have what we at the institution consider to be shortfalls and their implementation before considering the sentiments of stakeholders will be counterproductive to the objective of the legislation,” Oketch added.

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