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GAZETTE
JULY/AUGUST 1992
5. Site Conditions
It must be clear what site works the
contract price includes. If a lot of
earth removal has to take place
before building can commence is
this included in the price? If the
contractor encounters unexpectedly
difficult ground conditions such as
a soft spot and has to go down
seven foot into the ground for
foundations it should be clear
who is to pay for the extra cost of
this work.
Contractors, particularly those who
construct a large portion of the
building off site, frequently give a
quotation without inspecting the site
on the basis of a site being
reasonably level and soil conditions
being normal. Both parties to a
building agreement should take
great care that the position in
relation to the costs of such works
is clearly set out in writing.
6. It frequently arises in relation to
once-off houses that the parties agree
that the employer will arrange to
have certain parts of the completion
of the house, such as the wiring or
plumbing carried out by himself or
some other contractor on his behalf.
If such an arrangement is made the
terms of it should be confirmed
either in the agreement or by letter.
In particular, it should provide that
the contractor shall be entitled to give
the employer written notice if the
failure to complete any work is
causing delay and should provide
who is to be responsible for any loss
as a result of any such delay.
7. Payment
Practices vary as to how payment for
the contract is to be made. All that
is essential is that whatever payment
schedule is agreed between the
parties be clearly set out in the
schedule of the agreement.
Provisions should be made for
interest on late payments and for a
retention to cover defects appearing
after completion.
Please photocopy this practice note
and file for reference.
Conveyancing
Committee
Standard Form Bank Debentures
Solicitors acting for borrowers are
frequently presented with forms of
debenture or mortgage debenture
which are intended to secure their
clients' liabilities to the lending
bank. The solicitors should advise
the client on the nature of the
commitment to follow from the
client's execution of the debenture.
In many cases these debentures are
pre-printed and include provisions
which are not appropriate to the
particular loan.
In considering whether the debenture
is in an appropriate form, the
solicitor should have sight of the
bank's loan to the client. The
debenture should not do any more
than enable the bank to take security
in the form agreed to by the client.
In certain forms of debenture the
bank in addition to taking a floating
charge will also seek to take a fixed
charge over future acquired assets.
Apart from the consideration of the
validity of such specific provisions,
particularly relating to future
acquired registered land, the facility
offered to the client by the bank
may not in the first instance have
provided for such a charge. The
solicitor should protect his client
from executing a debenture which
reserves to the bank security over
and above what was provided for by
the bank in the loan offer letter and
accepted by the client.
Conveyancing
Committee
VAT on Property Transactions -
A Word of Warning
The Conveyancing Committee has
been contacted by a number of
practitioners who have encountered
difficulties in the area of Value
Added Tax on property transactions.
One such difficulty arose where a
vendor's solicitor inserted into a
contract for sale the usual clause
which provided that the purchaser
would pay to the vendor any Value
Property transactions - practitioners have
encountered difficulties with VAT.
Added Tax which would be chargeable
upon the transaction. The purchaser's
solicitor, acting in good faith and
upon production of what appeared to
be a valid VAT invoice, paid to the
vendor's solicitor at closing the
amount of VAT sought only to have
his claim for a refund of this VAT
disallowed by the Inspector of Taxes
later on the grounds that VAT should
not have been charged on the
transaction in that particular case
because it related to the sale of a
business as a going concern.
Quite clearly, it is not safe to assume
that if one pays VAT on foot of an
invoice bearing all the usual
characteristics that a refund of such
VAT will automatically issue. A claim
for a refund might well be refused on
the grounds that the particular
transaction, for any one of a number
of reasons, might be one which does
not give rise to a VAT charge.
The Committee recognises that the
question of whether VAT should or
should not be chargeable on a
particular transaction is a complex
one and often depends on factors
which a purchaser will not be able to
ascertain. In the light of this, the
Committee has made representations
to the Inspector of Taxes and the
Inspector, in recognising the
difficulties, has suggested that
purchasers' solicitors might contact
the Inspector and show him the
particular invoice on foot of which
payment is sought so as:-
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