Off the peg in the courts

A hung-over chief executive of a registered social landlord runs into the senior partner of her lawyers and they adjourn to the nearest pub. Once again, we take you behind the scenes …

SP: How was Birmingham? I could only pay a flying visit …

CE: Retro – Prefab Sprout was the headline act. That's "off-site modular construction" to you. I can see my development director might object to it. He's an architect and hates it, but as I tell him, most other things we use – cars, furniture, and so on – are "factory built". And besides, bespoke buildings have their problems – condensation, differential rates of expansion, flat roofs …

SP: Prefabs do raise some interesting questions for lawyers. There's procurement: the contract, the warranties, liabilities and so on. Also, how will modular housing, with its off-the-shelf product-liability implications, fit in with partnering arrangements and shared responsibilities?

CE: So if we're offered a site, we bring in consultants and a contractor in order to be Egan-compliant – what then?

SP: It will proceed as usual on mix and layout, but then comes the selection of which prefab system to use and deciding if any changes are needed to it. If the aim is cost savings, the pressure will be on to allow only minimal changes.

CE: And if the choice is wrong?

SP: It depends on why it is wrong. Was the basic prefab spec changed and if so, who wanted and who designed the change? If no changes were made, was the choice simply wrong for the user group on the site?

CE: Selection is likely to be a joint decision, but RSLs do rely on consultants' advice. They choose between what they are told are the options available.

SP: So the construction contract should allocate the design liability to exclude the RSL. The more interesting question is how the insurers will feel about risk-sharing between consultants, contractors and the suppliers of the modular system, particularly where the system has been modified.

CE: Call me cynical, but I suspect the long-term aim is to cut out most of the professional team to reduce costs. As prefab only works with volume, I bet the choice will be limited to an approved range of prefabs.

How will modular housing, with its product liability implications, fit in with partnering arrangements?

SP: If that happens, it raises questions over the liability of whoever limits grant funding or indeed planning gain to a prescribed range of factory-built products.

CE: What about site assembly? When I buy a car I do not expect to take any risk on a poorly executed job where some of the parts are not sealed properly and the car is leaky. If my tenants are wading in wellies and the lawyers are knocking on their doors and my board is having a secret meeting to give me 100% backing, I do not want a hippie hold-hands meeting to solve the problem. I want it sorted, I want it sorted fast and I want it sorted at someone else's expense.

SP: We have to separate things going wrong with the procedure for sorting things out from the liability for things going wrong. Moving immediately to the adversarial posture, as some lawyers tend to do, is not the best way forward. Everyone makes mistakes and should be given a chance to rectify them. But if you're faced with a serious mistake with serious consequences that can only be limited by quick action, then the person who made the mistake should only be given a short time to put it right or face litigation.

CE: So again the line of responsibility should be clear.

SP: Yes, and the greater the use of the modular system and the more limited the choice, the more an RSL should insist on fit-for-purpose product liability from the contractor, who can take a counter indemnity from the supplier.

CE: We'd want a direct warranty from the supplier and the consultant can be liable to everybody.

SP: Don't forget the government or the NGO that prescribes the systems for grant or planning gain – particularly if they selected the systems without complying fully with European procurement directives.

CE: Well, on procurement, the Brum talk was that the RSLs have to comply with the EU regime. I know you lawyers said not to panic years ago, but that sooner or later this would happen. Should I start to comply?

SP: There's still a long way to go – think like the rest of Europe do. The downside is low, the upside expensive – wait and see.