BERMUDA Law and Practice Contributed by: E. Scott Swainson, Andrew Morgan and Erik Gotfredsen, Wakefield Quin Limited
7. Construction 7.1 Common Structures Used to Price Construction Projects Fixed price construction is common on newbuilds and material additions. Renovations are typically “cost and charge” (time spent) contracts, as the extent of the work may not be apparent until substantial demolition has occurred. 7.2 Assigning Responsibility for the Design and Construction of a Project Construction contracts vary depending on the role of the contractor and the architect. Property developers normally accept liability for both the design and build under pre-sale agreements (generally for a “turn-key” product) and tend to employ an in-house project man - ager or site foreman. Homeowners would normally engage an architect to design a house and are likely to retain their services to oversee the quality on the build. The bank would normally engage a quantity surveyor to manage draw - downs under a construction loan, if applicable. 7.3 Management of Construction Risk Most contracts include wide extensions and exclu - sions for force majeure events (including encountering hard rock and hurricane events). The contractor should be obliged to maintain contrac - tors’ all-risk liability insurance with the landowner and any lender noted thereon. 7.4 Management of Schedule-Related Risk Construction Contracts Construction contracts for larger projects are gener - ally documented in architect-driven American Insti - tute of Architects forms. Smaller projects are often recorded in simple letter agreements. Target Dates and Agreed Liquidated Damages The contract may include target dates but agreed liq - uidated damages are relatively rare. Phased payments are generally linked to the progress of work, so the contractor has a financial incentive to perform. Dam - ages for actual losses that are a reasonably foresee -
rity deposit on closing. A lease automatically binds the new landlord, without the need for a new contract. 6.21 Forced Eviction A landlord may take a tenant to court to seek an order for termination and possession, following breach or lease expiry. A right of forfeiture is converted to a right to seek termination via the courts. No “self-help” is allowed, even if the lease has expired. It takes approximately four months to secure an order for possession. The court may allow the tenant a peri - od to vacate (on average two months, if the property is residential in nature). Once the grace period has expired, the court-appointed bailiff will physically evict the former tenant. 6.22 Termination by a Third Party Protection on Termination A lease may be terminated by a superior landlord or lender (who did not consent to the creation thereof) on taking enforcement action. Where the freeholder approved the sublease, sub-lessees have statutory protection during the court process for termination but may have to step into the shoes of the head ten - ant (accepting a tenancy of whole at the same rent or remedying breaches) in order to avoid eviction on termination of the head lease. Compensation for Improvements There are no statutory provisions that award compensa - tion on expiry. Most leases give the landlord the option to accept or require removal of the tenant’s fit out. 6.23 Remedies/Damages for Breach Common law and case law govern the damages that are available to a landlord in the event of termination due to tenant default. Such damages tend to be lim - ited to rent arrears, any loss flowing directly from the tenant’s breach of covenant (not involving the pay - ment of rent) and any costs incurred by the landlord in enforcing the provisions of the subject lease. Typically, security deposits are not paid pursuant to commercial leases in Bermuda.
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