Sharp rise in number of firms going to law to recover unpaid fees, as recession hits clients’ cashflow
The number of architectural practices taking legal action to recover fees has rocketed, and there has been a dramatic increase in the number seeking legal advice from the RIBA.
Legal experts have told the AJ they are dealing with a significantly greater number of enquiries, as the financial crisis causes clients to withhold payments, forcing firms to take legal action.
Richard Brindley, executive director of RIBA professional services, said the institute had seen a ‘sharp rise’ in the number of calls to its legal hotline.
He said: ‘It started gaining momentum at the beginning of this year and has increased. We are also noticing a lot more calls for our dispute resolution service.’
Last month, Aukett Fitzroy Robinson (AFR) went to the High Court, suing the billionaire property tycoon Simon Halabi for fees owed for design and planning work to convert 100 Piccadilly into a hotel and private members’ club. The defendant counterclaimed, alleging there was a failure by AFR to progress the planning process. The firm declined to comment on the case.
Robert Stevenson, a partner at law firm Berrymans Lace Mawer and an advisor on the RIBA legal helpline, said: ‘It isn’t just firms dealing with the big developers; it goes across the board at all levels.’
According to the Barclays Late Payments report, a 20 per cent rise in late payments has forced UK businesses to write off nearly £5 billion in the past 12 months. This equates to £1,133 for every small to medium-sized business.
Sandra Crossley, director with AJ100 Top 30 firm Taylor Young, said she has been with the firm for over 20 years, but only in the past 18 months had it pursued legal action to recover fees. ‘As a consequence we have stepped up due diligence checks on potential new clients,’ she said.
Anthony Speaight QC, a specialist in professional negligence claims against architects, confirmed that the number of cases had increased. He said: ‘Whereas before there was a reluctance to make a claim against a good client, preferring instead an amicable agreement, firms now claim for every penny.’
Comment Peter Drummond, chief executive, BDP
The fee situation is getting harder, as some clients struggle with viability, shrinking budgets and problem projects. At the same time, our profession is not as organised as it should be in setting out contracts, terms and payment schedules, sometimes working on a basis of trust. This is a worthy value, but they are the first to be taken advantage of. Legal action is a matter of the last resort, and documentation, patience and resolve has to be robust. Debts on international work are even harder to resolve and some firms will be seriously struggling with this.