30 September 2019

Modular Buildings: Sub-divide and conquer?

The last few years has seen an increasing focus on modular buildings as a potential solution to the UK’s housing crisis. The Housing White Paper, published in early 2017, made reference to diversifying the housing market by promoting more modular and factory built homes – but how does this method of construction differ from the market-norm?

Ranging from the traditional flat pack, pre-fab houses to fully furnished and decorated rooms or pods, modular buildings are those made up of separate sections, constructed offsite then delivered onsite for assembly. They can take anything from a few days to a few months to complete and can offer a speedy and cost-efficient alternative to more traditional building methods.

The use of modular buildings can be traced back to as early as the 1600s, although, for many of us, they are most closely associated with the post-World War II era, when pre-fabricated housing was used to address post-war housing shortages. Intended as a temporary measure, the perception of these pre-fabricated buildings was that they were low quality and of low value, even though a number of these buildings still remain in place today.

The rise of more sophisticated design and digital manufacturing technologies, coupled with an increased demand for cost-effective solutions to space and accommodation shortages, has meant that modular buildings are experiencing a resurgence. Not only do they play a key role in seeking to address housing shortages, they are also in use by businesses, schools and hospitals to provide anything from onsite accommodation on major infrastructure projects, to classrooms and even operating theatres.

Modular construction is also increasingly being used on large scale projects, such as hotels, student accommodation and build to rent schemes where standardisation of design is routine. Due to the shorter build time, rental income can be realised more quickly than on a traditionally built scheme, which in turn can be utilised to offset the initial increased construction costs that modular schemes can involve.

Advances in digital manufacturing techniques mean that the more complicated technical construction work can now take place in a controlled factory environment, which inherently carries less safety risk than more traditional on-site methods. It also opens up additional opportunities for creativity in the architectural design of these buildings and facilitating environmentally sustainable practices. Factory controls mean that modular buildings can be precision made, with units standardised to fit a tighter building envelope while also being constructed to a more energy efficient standard. Travel and delivery time of completed units can also be cut down, reducing environmental footprints and ensuring greater efficiency than traditional construction methods.

With fewer construction workers needed onsite to assemble modular units, this method of construction can also bypass the ongoing issues of labour shortages in the construction sector. Those of us living near development sites may also rejoice at the reduced noise pollution that modular construction can offer!

From a legal perspective, there are a number of factors to consider when utilising modular construction methods. As modular design and construction involves more bespoke methodology and production systems, it can be a challenging to find alternate contractors to step in and complete the project in the event that the original contractor is in default or becomes insolvent. This could lead to an expensive redesign with potential timing implications for the integration of modular components with other construction aspects of the project and, ultimately, the date of delivery of the final project. The risk of contractor insolvency must be addressed at contract stage, with performance bonds, guarantees and insurance considered in order to mitigate this risk.

Quality control from the factory stage, through to delivery and construction onsite should also be considered, with sufficient rights for the developer client to test and inspect the product throughout the cycle.  When defects in modular units only come to light onsite, it becomes significantly more of a challenge and expense to get issues rectified so inspections at the manufacturing stage are especially important.

Transit risks should also be taken into account and insurance allocated against the risk of damage to units during transport to the site.  Indeed, the allocation of risk in general throughout the production lifecycle is an important point of negotiation between the developer and the contractor, particularly prior to the point of delivery where the legal ownership of the goods may be less clear-cut. For instance, the contractor may have paid for the units while they are stored in the factory, but they are still under the control of the contractor while they remain in that environment. In a contractor insolvency situation, it is important that the units are demarcated from other stock in the factory so they are not considered as part of the contractor’s property.

In essence, it seems that modular construction will play an increasingly important and innovative role in the future of the construction industry. However, there remain some inherent concerns that will need to be addressed at the contractual stage to ensure that the potential cost and time efficiencies which modular construction can offer are not compromised.

Our Insights

"They are an elite-level firm, they're based in Mayfair and provide a Mayfair service. They punch above their level. What they do is really, really impressive."
Chambers HNW Guide 2018
×