Investors, be jointly liable!

The Polish government is currently working on amendments to the Civil Code, which are of some importance for the construction industry and include changing the rule concerning investors' and contractors' joint liability towards subcontractors. If this is approved by the Sejm, subcontractors will have the right to demand payment of receivables, (for work entrusted to them by general contractors), from the investor. Many however, think that this amendment will change nothing.

All for one and one for all
Joint liability obliges investors to pay contractors' liabilities to subcontractors, even if the investor has already paid enough in repayment to the general contractor. In return, the investor has the right to closely control any settlements between the general contractor and subcontractors.
Although introducing the rule of joint liability will be welcomed by subcontractors most of all, it will affect all participants in the construction process: from investors to subcontractors.

Investors will check
Investors will have to assess general contractors' financial situation and credit status more thoroughly than at present. If it turns out that the contractor's predicament is not completely stable, the investor will be entitled to demand banking or insurance warranties. If there are payment delays between general contractors and subcontractors, the investor will have to take ultimate responsibility, even if it has already paid the general contractor for completed work.
General contractors, however, will lose the right to freely select subcontractors as investors' consent will be needed before any agreements are concluded. If subcontractors want to entrust part of the work to another company, they will have to obtain a written agreement from the investor and the general contractor.

A small step in the right direction
Agnieszka Krzywicka, General Director of the Polish Association of House Builders (Polskie Stowarzyszenie Budowniczych Domów), thinks introducing the rule of joint liability will lend some equilibrium to relations between companies in the construction market. ,This is a good idea, as is appointing construction inspectors. Some people may complain that construction costs are growing, but companies do feel more secure," she says.
Ms. Krzywicka thinks that one good next step might be to pass laws, which stipulate that VAT is due when companies receive payment for their invoices and not at the moment of invoicing, as is the situation now.

Representatives of many construction companies claim, however, that the proposed solutions will not improve anything for contractors and subcontractors. Janusz Zalewski, President of the National Association of Construction Employers (Krajowy Zwiazek Pracodawców Budownictwa), thinks the act, which allows subcontractors to claim remuneration from both investors and general contractors, is a bad idea. Court procedures ought to be shortened instead, he feels.