Commercial and Legal Considerations in Modular Construction

Commercial and Legal Considerations in Modular Construction

Modular construction in commercial, industrial and datacenter projects is rapidly displacing on-site “stick built” construction methods.  Modular systems are factory built “off-site” and then transported by truck to the jobsite for installation.  This construction methodology has always been the wave of the future but most recently it has become mainstream.

Modular construction methods are key to increasing labor productivity, overcoming skill shortages, improving site safety, accelerating construction schedules, standardizing quality, facilitating factory commissioning, minimizing inclement weather delays, enabling tax benefits, lowering financing costs and achieving greater environmental sustainability, to name a few.

A variety of unique commercial and legal issues may require consideration, such as;

  1. These issues may include different and varied application of building and safety codes. In addition to local code requirements, most states have also adopted specific modular building standards.
  2. Some projects may present concerns about contract drafting, and legal codes or doctrines that may apply to modular construction in ways different from traditional construction, including the application of the Uniform Commercial Code, products liability law, and statutes of limitations.
  3. Additional considerations include issues relating to insurance coverage and liens.
  4. Clearly defining point of title transfer is key, as is verifying that adequate cargo insurance is in place to cover any loss associated with transportation issues.

Regulations and laws governing modular construction, depending on the jurisdiction, can be surprisingly different from “stick-built” projects.   Therefore an owner or developer must have confidence that its architects, consultants and modular solution manufacturers have the requisite knowledge and experience to address these issues to ensure projects success.  Potential pitfalls can be avoided and maximum benefits obtained when an owner and/or developer assembles and involves the design and build execution team early on in the project development cycle.