Option to take a lease – development agreement or construction contract?

Where an agreement contains not only building obligations but also an option allowing one party to acquire a leasehold interest in the property once the development has been completed does the statutory adjudication procedure apply? The answer depends on whether the agreement is a "development agreement" or a "construction contract". This was the issue that was recently discussed in the Captiva Estates Limited –v- Rybarn Limited (in administration) case.

Where a contract is a "construction contract" then the parties have the right to seek adjudication pursuant to the HGCRA 1996. However, "development agreements" are excluded from the adjudication process.

This case concerned a contract relating to the construction of 28 flats and ancillary car parking spaces. The agreement also contained an option whereby the contractor could purchase 7 of the 28 flats once completed.