Introduction
Law No. 71431 (the "Blanket Law") provided extensive amendments to a number of legislation, including mong them, the Building Inspection Law No.47082 (the "Building Inspection Law").
In furtherance to the revised framework established by the Blanket Law, the Regulation on the Implementation of Building Inspections (the "Building Inspection Regulation") was also updated to provide further details on the changes.
These changes in principle relate to: (i) limitations on "just ground" termination of audit services agreements; (ii) the procedures with respect to the selection construction audit companies; and (iii) the service fee payable to construction audit companies and have entered into force on 1 January 2019.
Termination of audit service agreements
Perhaps the most significant amendment that was introduced by the Blanket Law relates to the termination procedures of audit services agreements.
According to the Blanket Law, audit services agreements can only be terminated on certain grounds to be determined by the Ministry of Environment and Urbanisation (the "Ministry"). These circumstances are set out in some detail in to Article 21 of the updated Building Inspection Regulation.
Although the Amending Regulation allows the parties to terminate the same on a numerus clausus basis by reliance on the circumstances set out in the updated Building Inspection Regulation, such termination needs to be validated through notifying the respective authorities (e.g. the Provincial Directorates for Environment and Urbanisation, metropolitan municipalities and other municipalities, etc.) by virtue of a written notice which includes the reasoning behind the termination.
Audit company selection
Previously, building owners were entitled to select and designate construction audit companies in their sole discretion which arguably led to some moral hazard issues between audit and construction companies.
The Blanket Law and the updated Building Inspection Regulation introduce new limitations in this respect and provide that building owners will be required to engage construction audit companies that will be determined by the Ministry for the given construction project, on the basis of an electronic grading system.
Service fees
Furthermore, the calculation of the service fee to be paid by the building owners to the construction audit companies was also amended.
Previously, it was not allowed to determine a service fee amount of not less than 1.5% of estimated construction costs and this fee was subject to certain adjustments to take account of cost variations during construction.
Following the entry into force of the Blanket Law and the updated Building Inspection Regulation, the service fee amounts is required to be equal to a flat 1.5% of estimated construction costs and such fee will not be adjusted afterwards.
Footnotes
1 Published in the Official Gazette numbered 30425 and dated 18 May 2018.
2 Published in the Official Gazette numbered 24461 and dated 13 July 2001.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
