As the Covid-19 Coronavirus pandemic continues to have an impact on the economy, many businesses – sometimes entire industries – have either temporarily shut their doors or have implemented strong work from home policies for an indefinite period.
The construction industry has not undergone a complete shutdown yet, with many construction sites open, despite social distancing advisories from all levels of government and health care professionals.
Even with construction sites still operating during the pandemic, developers are starting to issue notices to stakeholders such as pre-construction condo buyers, that supply chain issues and potential construction site slowdowns may cause a delay in delivery.
Builders may require significant changes and safety precautions to adhere to public health and safety recommendations. The Construction Law Group at Cassels, a corporate law firm in Toronto, issued a list of high-level recommendations for employers in the construction and land development industry to keep in mind as the Covid-19 pandemic continues.
“As Covid-19 evolves, the emphasis now is on social distancing, health and safety concerns, and government recommendations,” says Matthew Alter, Chair of Cassel’s Construction Group and co-author of the recommendations. “Clearly, this could have an impact on the construction industry as a whole, and individual projects across Toronto, Ontario, and Canada. It is worthwhile to provide these recommendations to industry participants.”
The recommendations focus on four areas for industry leaders to keep top of mind:
- Stay informed – Companies should regularly check government websites and news releases to stay up-to-date on the latest provisions and health recommendations.
- Communication – All parties have to stay in touch to avoid surprises. It’s very possible that projects scheduling, delivery, and completion dates could be impacted – due to supply chain and personnel restrictions, so clear communications – both to and from – construction firms, developers, buyers, and all other stakeholders, is critical from the start.
- Review contract provisions – Contractual obligations exist, and as Covid-19 develops, if there are any anticipations that these obligations cannot be met, parties should review their contracts to see what provisions exist that can excuse performance. This will likely take the form of force majeure, which typically addresses unanticipated events beyond anyone’s control.
- Review insurance policies – Organizations should review all required and applicable contract and project insurance policies to evaluate whether there is appropriate coverage for potential losses that they may incur.
“The very nature of this Covid-19 situation is that it’s unexpected,” adds Matthew. “Parties to a contractual arrangement with obligations for performance did not expect this health crisis or the ramifications it’s having on the economy. The question is, can parties rely on the terms of their contracts to make this point?”
With project delays and completion deadline push backs seeming inevitable, Tarion, the Ontario's home building regulator and new home warranty protection provider, issued information to both developers and new home buyers meant to provide details on what sort of delays to expect. Unavailability of building materials, permit delays, inspection delays, and/or labour disruptions could all impact contractually agreed upon construction completion timelines.
An important takeaway from Tarion's Covid-19 information, is that developers may look to establish "Unavoidable Delay Periods", which combine any period of construction delay directly caused by the pandemic (e.g. supply chain issues) and the remobilization period, which factors in the time it will take to bring construction of any project back to full speed. Further, home buyers should expect communication from developers regarding these potential or actual delays within 10-20 days of the developer or construction company determining a delay will occur.
While many construction sites continue to operate, if any level of government mandates social distancing, or if supply chains are further impacted, countless projects across Toronto and Canada could be affected. We’ll continue to monitor Covid-19's impact on the construction industry, and will provide updates on major shutdowns.
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