New regulations clarify Builders Law

The construction boom following Hurricane Ivan unleashed large numbers of new contractors into the construction industry in the Cayman Islands.

However, during reconstruction, it quickly became apparent that many contractors did not meet acceptable standards of competence.

In part to address this problem, the Government of the Cayman Islands, with the support of the Cayman Contractors Association, introduced legislation designed to regulate all companies and individuals carrying out construction in the Cayman Islands.

The Builders Law received assent in 2007 and its corresponding regulations were gazetted on 4 August, 2008. It is anticipated that the legislation will come into force in January 2009.

Under the new law, companies and individuals carrying out construction must be licensed by the Builders Board (not yet formed) under one or more of the following categories: building contractor, civil contractor, general contractor, residential contractor and/or subtrade contractor.

The licence under this law will be the only business licence required for contractors and the annual fees range from $1,000 for subtrades up to $5,000 for general contractors. Corporations carrying on construction without a licence are liable to a maximum $10,000 fine in addition to a $2,500 fine each day that the offence continues.

Furthermore, directors and managers are liable to a maximum $2,500 fine in addition to a $250 fine each day that the offence continues. Nicole Bucher, an associate at the law firm Appleby, is familiar with the new regulations.

She advised that ‘it is important that contractors understand which licence category they should apply for in order to avoid delay and complications in the approval of a licence. A lawyer can assist in preparing a thorough application that will assure the contracts that they are granted the highest category which they deserve’.

The Builders Board will have the power to revoke licences and will rely on information provided by a public complaints process when considering revocation and renewal. According to Steve Hawley, president of the Cayman Contractors Association, ‘it is anticipated that the public will have access to the licences electronically through a website to assist them in making consumer choices and to increase transparency in the industry.’

Further to the legislation’s public protection mandate, the new regulations set the minimum amount of the mandatory public liability insurance to $1 million for all contractors with the exception of the subtrade contractors who must be insured in the amount of at least $500,000.

Ms Bucher noted that, ‘the law also protects construction workers by requiring employers in the industry to demonstrate compliance with health insurance, pension, workmen’s compensation and the labour law. Evidence of such compliance must be submitted to the Builders Board with the licence application’. . It is anticipated that, upon request by the applicant, the relevant government ministries will provide letters confirming compliance with the laws under their jurisdiction.

To obtain a licence, contractors must demonstrate to the Builders Board that they are qualified to carry on construction in the Cayman Islands. The new regulations provide that contractors may substantiate their application by submitting references from their clients, suppliers, other contractors and/or members of related professional associations. They may also describe the experience of the company and its employees and may submit information documenting their projects.

Contractors must also demonstrate to the Builders Board that they have a sufficient number of qualified people under their control to carry out the work of the company. These people must be licensed as individuals under the Builders Law. While the legislation contemplates written and oral testing, according to Steve Hawley there will be no ‘test’, as such.

The applicant will have the opportunity to create a package of references and other documentation that he feels represents a description of the company and its employees that demonstrates the justification for the category being requested. This package may include proof of educational qualifications submitted directly by the educational institution. Active experience may also be submitted by way of a chronological list of employers and projects which can be independently corroborated by the Builders Board. Again, Nicole Bucher recommends consulting a lawyer when preparing the application for the licence as they will be more familiar with the requirements of the Builders Board and the success rate for approval will be greatly improved.

In deciding whether to issue a licence, the regulations make it clear that the Builders Board must make inquiries into the financial responsibility and professional reputation of each applicant.

The Builders Board will consider factors such as bankruptcy, unsatisfied court judgments and the financial stability of the company. Financial stability may be established by letters from the bank stating the amount of a performance bond that it is prepared to provide, the amount of overdraft allowed, whether the company is in good standing and the amount that it has on deposit.

Finally, contractors must demonstrate to the Builders Board that they are Caymanian controlled with at least 60 per cent Caymanian beneficial ownership and a minimum of 60 per cent of the directors must be Caymanian unless the company is foreign owned and has been operating in the Cayman Islands under a Local Companies (Control) Law licence for more than 20 years. Nicole Bucher stated ‘an interesting feature of the Builders Law is that it effectively restricts non-Caymanian controlled, foreign owned start-up companies from entering the industry in the future’.

According to Steve Hawley, in order to avoid a bottleneck effect in processing licences under the Builders Law come January 2009, contractors will continue to operate under their Trade and Business Licence until it is due for renewal, at which time they must apply instead to the Builders Board.

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