Redefining responsibilities in building supervision: who will be responsible for what?
Having divided the parties concerned in the building industry for some time, the Quality Assurance in Construction Projects Bill was recently adopted as law by the Dutch Senate. The successful vote can be considered a success for Kajsa Ollongren, Minister of the Interior and Kingdom Relations, and marks the end, for the time being, of protracted discussions on inadequate construction standards and safety incidents in the building industry.
Quality Assurance in Construction Projects Bill adopted
Once the Act has entered into force, the previous regular practice of submitted building plans only being inspected and rubber stamped in advance by the local authority will be replaced by a system of inspection during and after the building process. In the future, the contractor is also more likely to be held liable for any defects that come to light after completion. The Act was controversial since inspections will be carried out by private parties, so-called quality assurers. This inevitably reduces the role of local authorities in enforcing regulations, leading to a situation that they consider undesirable. The Minister addressed these concerns with a series of commitments in a so-called 'administrative agreement' with the VNG (Vereniging Nederlandse Gemeenten / Association of Netherlands Municipalities), enabling her to gain the support of the VNG and allowing the legislation to be passed by the Dutch Senate. The local authorities will continue to play a role, and will certainly have the ability (and duty) to check the quality assurers.
Extended liability for contractors
The principal aim of the Bill is and remains to improve construction standards. This is achieved, on the one hand, by introducing inspection by independent quality assurers who will inspect the work during the construction process and, on the other, by more readily assuming liability on the part of the contractor. Where the law previously assumed a discharge from liability for the contractor after completion and acceptance, it now remains liable for defects that were not discovered upon completion, unless the defects cannot be attributed to the contractor. The contractor is also under a stricter obligation to warn: it must unequivocally report any potential errors in the client's design to the client in writing. In a previous newsletter we highlighted several implications of the new liability regime. As we concluded at the time, the change in the law makes it more important for the contractor to ensure defects that were identified but were not noted (for the simple reason that they were not accepted) are explicitly recorded in the completion report. This remains unchanged in the Bill, so that the previous recommendation continues to apply.
Division of duties between the quality assurers and the local authorities
To address the concerns of the VNG, Minister Ollongren has further detailed the division of duties between the quality assurers and the local authorities in the aforementioned administrative agreement: 'The quality assurer will inspect, on behalf of the permit holder, that in terms of quality assurance the work is carried out in such a way that the structure may be relied upon to comply with the building regulations in sections 2 to 6, inclusive, of the Buildings Decree 2012.' The quality assurer is obliged to render account to the competent authority for its inspection once it has been carried out. The agreement stresses moreover that 'Housing and building control [...] [is] a statutory task: public oversight is essential.' Where, (jointly) on the basis of the quality assurer's report there is justifiable reason to do so, the local authority may exercise its powers of enforcement in a manner that it deems necessary in the specific case.
Trial projects between now and 2021
Not much will change for construction market parties for the time being. Prior to the entry into force of the Act, which is currently planned for 1 January 2021, the intended processes and procedures will be tested in a series of trial projects. The VNG and Minister Ollongren plan to test the new system by having 10% of the permits under consequence class (CC) 1 (not exceeding 20 metres in height, e.g. homes, business premises of no more than two storeys and small infrastructure works) issued according to the new rules. After consultation with the parties in the construction industry, Minister Ollongren will announce not less than six months before 1 January 2021 to what extent the system can be reliably introduced with effect from that date, thereby leaving the door open to a possible extension. In addition, the new law will initially only apply to consequence class 1. The administrative agreement stipulates that after three years Minister Ollongren will evaluate whether the new law has led to improved construction standards at acceptable cost. Based on the evaluation, the Minister, in consultation with the VNG and construction market parties, will review whether consequence classes 2 and 3 can also be integrated in the system.
Contractors, developers, clients and local authorities are strongly advised to take the opportunity now to familiarise themselves with the changing responsibilities in relation to the building process. On the one hand, contractors will become subject to a stricter obligation to warn of errors in the client's design and they must engage the services of a quality assurer while, on the other, local authorities will not be discharged of the obligation to supervise construction projects. In addition, both contractor and client must be alert to what is recorded in the completion report, since any disputes concerning recorded or unrecorded defects can be prevented at an early stage.
Loyens & Loeff closely monitors developments that are relevant to the construction industry. The statutory regulations governing contractor liability are one of the topics covered in the book 'Building in the Netherlands' that was recently published by Loyens & Loeff. This book provides a useful overview of the main legal and tax aspects of and for building and project development practice in the Netherlands and can be obtained via www.loyensloeff.com/bouweninnl.
If you have any further questions on this issue or would like to receive more information, please contact Maarten van Laar or your trusted adviser at the Loyens & Loeff Real Estate Team.