Innovative construction methods and the time, cost and resource savings they bring play a pivotal role in the growth of the industry. While modular construction may no longer be the newest technique on the market, its relevance to modern developments continues to grow.
As the UK looks to tackle housing concerns, the impressive speed and efficiency of modular developments offer great appeal, with the National House Building Council (NHBC) and the UK government assisting modular projects via plans like the Affordable Homes Programme.
However, along with the benefits of modular construction come some unique challenges and considerations that can be deceptively difficult to navigate. From monetary risks to licensing issues, the below article explores legal challenges and opportunities in modular construction.
What Is Modular Construction?
Modular construction is a construction technique that sees parts (modules) of an installation built off-site. In a controlled factory environment, multiple identical versions of a component like a wall, floor or even a complete room are built to be stored, then transported as required.
The controlled and manageable nature of this technique presents sizable time, resource and cost-saving opportunities, increasing the appeal of modular construction to many companies.
Key benefits of modular construction include:
- Quicker builds: Project timelines can be reduced by 20-50% by constructing major components off-site, while delays caused by adverse weather can also be mitigated.
- Fewer errors: Prefabricated components are constructed by, or with guidance from automated machines, helping to limit the risk of errors and potentially costly failures.
- Less waste: Modular components are standardised to help minimise waste, with any excess materials fed back into production lines to further improve resource efficiency.
- Customisation: Components can be customised and replicated easily to help meet compliances, e.g. unique fittings for safety devices like vape detectors or fire alarms.
The Legal and Practical Challenges of Modular Construction
While prefabricated, modular construction projects offer attractive benefits in the form of cost and time savings, the unique nature of this building technique can present some challenges.
Ownership and Payment
Traditional construction contracts see payments to contractors made at regular intervals in relation to the value of works performed at predefined junctures. This structure is designed to accommodate standard practices whereby costs are spread out across building projects.
In modular construction, contractors incur large fees at the beginning of a project during the manufacture of prefabricated components, typically requiring payment upfront to cover costs.
This can cause issues with both payment and ownership contracts, as typically materials are not considered the recipient’s property until they’re present on-site. Both parties will need to outline and agree to unique terms that protect their financial interests before work can begin.
Manufacturer Bankruptcy
As mentioned above, in traditional construction contracts the client does not take ownership over materials before they arrive on-site. In modular construction, this can cause issues, as unless a unique contract is signed the manufacturer will maintain ownership prior to delivery.
Should the manufacturer become bankrupt before a delivery is made, all modules will be considered assets of the bankrupt company. This leaves the client with an unsecured claim against the assets that’s unlikely to be returned in full even if a pre-financing deal was made. Having appropriate home or property insurance in place may not cover every bankruptcy-related loss, but certain policies can help mitigate related financial risks, especially if damage or theft occurs while modules are in storage or transit.
Intellectual Property
As prefabricated building modules are elements of construction in their own right, they carry more intellectual property than a typical building design. Manufacturers of modular building components have an obligation to protect their intellectual property rights, which can cause licensing and usage issues for clients, especially if projects are to be expanded in the future.
If comprehensive agreements are not made prior to the start of the initial project, expansions or new developments that share the same design can become legally complicated. Outlining which aspects of a completed building containing modular components fall under intellectual property can be challenging, potentially leading to costly and time-consuming legal disputes.
Summary
Modular construction continues to bring attractive time, cost and resource-saving benefits to professionals in the construction industry, with the UK government and independent regulatory bodies seeming to encourage its use to help address current housing concerns.
However, the unique nature of modular construction can bring about some significant risks, particularly in regards to pre-financing, asset ownership and intellectual property. To benefit from modular construction while minimising risks, professionals must take extra precautions to ensure contracts address the above challenges, only then can projects be safely pursued.