Modular Development

Published 23 May 2022

Gemma Leonard, Head of Residential at DAC Beachcroft, looks at the particular legal considerations around Modern Methods of Construction (MMC).

 The benefits of the modular option, a growing part of the portfolio of approaches open to developers, include:

• a consistently high quality product, with automated assembly and rigorous checks in place at the factory,
• fewer defects due to precision engineering
• rapid construction times
• less energy used in production,
• reduced energy costs for the resident,
• and flexible interiors that adapt to lifestyle changes.

The build process is not and can’t be the same as the traditional build, resulting in new legal considerations. There include, but are not limited to,  these areas for example:

• Avoiding Disputes – the many bespoke elements to modular build need to be considered contractually  to ensure all aspects are covered in an attempt to limit future disputes
• Quality Control –legal agreements in this area need to be bespoke and tailored to what can be agreed on a site by site basis and sign off at each stage of the build process.  A great deal of thought needs to go into those provisions to ensure that they work in the right way. Standard form contracts just do not adequately cover off manufacturing and the ability to inspect and test products within the factories. A bespoke sign off regime needs to be agreed and developed to include quality but also building control and fire safety.
• Title Issues - Modular brings with it new discussions about who takes ownership and at what point, with advice and bespoke drafting needed over issues of title and payment profiles . The VAT treatment around golden brick is potentially different too, so specialist advice is needed on a site by site basis.
• Logistical Considerations - wide load lorries carrying the home need site access. These logistics mean that sites need to be carefully selected. There is also the added risk factor that modules could be damaged or destroyed while in transport to the site. Contracts will need to go beyond the usual professional indemnity and public liability insurance, and set out requirements to adequately pack the modules and ensure their safe arrival.
• Lender requirements – lenders have different policies for modular homes in terms of what they consider to be acceptable for financing or mortgage purposes and these will all need to be considered and provided for as part of the deal.

DAC Beachcroft’s Modular Development group comprises real estate, construction, planning and tax lawyers. Working with innovative businesses in this area we have built up a strong body of practical knowledge .

This article first appeared in the May edition of Housebuilder.

For further information please contact:

Gemma Leonard, Partner, DAC Beachcroft

gleonard@dacbeachcroft.com

Our Modular Development group is part of a wider Real Estate team. With 170 legal experts, we are one of the largest Real Estate practices in the country, with the breadth and depth to have dedicated sector teams in Residential, Retail, Logistics, Offices and Health for example.