‘Gateway 2 is delaying our project. Who bears the risk?’

We are a developer of a 22-storey residential building in London. We appointed our contractor on a design and build contract, and the programme assumed construction would start within three months of planning consent. Our Gateway 2 application was submitted to the Building Safety Regulator (BSR) eight months ago. It was initially rejected, resubmitted, and we are still waiting for approval.

Our contractor is claiming the delay is our risk and is seeking an extension of time and additional preliminaries costs. Are they right?

This is a problem that is becoming increasingly common across the residential sector, and one that many developers and contractors are encountering for the first time without the contractual and programme framework to deal with it properly.

The short answer is that the outcome will depend largely on what your contract says, what your agreed programme assumed, and who holds design responsibility.

Under the Building Safety Act 2022, no construction work may commence on a higher-risk building (HRB) – defined as any building over 18 metres or seven storeys with at least two residential units – until the Building Safety Regulator (BSR) has granted building control approval.

The BSR has a statutory review period of 12 weeks, but in practice the average approval time has been running at closer to 31 weeks, according to recent data from the Building Safety Regulator, with an approval rate of 48%.

If the BSR issues a Further Information Notice during review, the statutory clock pauses entirely. This is not a minor administrative step. It is a hard regulatory stop.

The first question is: whose design is it? Under a design and build contract, the contractor typically holds design responsibility. If the Gateway 2 application was rejected because the design was non-compliant due to incomplete fire stopping details, uncoordinated facade specifications or missing product test certificates, then that is likely to be treated as a contractor-caused delay. In that scenario, the contractor would have no entitlement to an extension of time and could face liability for liquidated damages.

However, if the application was competently prepared and the delay is solely attributable to the BSR‘s own review process, the position is less clear. Most standard JCT contracts include a Relevant Event for delays caused by the exercise of statutory powers, but whether BSR regulatory processing falls squarely within that provision or whether it is a risk the contractor should have priced is precisely the kind of question that is heading towards adjudication across the industry right now.

First, review your programme baseline. If the contract programme made no realistic allowance for a Gateway 2 approval period, which is common in contracts entered before the new regime was well understood, you may have a baseline dispute before you even get to causation.

Second, interrogate the rejection. Was the application rejected due to design deficiencies within the contractor’s scope, or was it rejected for reasons outside anyone’s control? The answer to that question will significantly affect entitlement.

Third, check your change control obligations. Any design amendments made in response to the BSR’s requisitions must be managed through a formal change control process. Undocumented changes could compromise your position and create further regulatory exposure down the line.

Finally, do not wait for a dispute to crystallise (defined by a claim or assertion made by one party being rejected, ignored, or not admitted by the other party and a clear dispute arises). The programme and cost consequences of Gateway 2 delays are significant and the contractual mechanisms in most standard forms were not written with this regime in mind.

Early legal and delay analysis advice, combined with transparent dialogue between the parties, is far more likely to produce a workable outcome than entrenched positions once the project is already months behind schedule.

Syed Muzaffar is a director at Decipher.