How Is the Value of LADs Calculated?
LADs are a pre-estimate of loss, not an assessment after the fact. Their value depends on the type and scale of the project. Several factors influence this estimate.
In speculative development projects, the amount borrowed plays a major role. The interest rate on borrowed money helps determine LAD values. If LADs become relevant, monthly costs serve as the basis for their calculation.
Other factors that affect LAD values include:
- Rent for temporary accommodation
- Additional storage costs
- Any other predictable cost resulting from project delays
LADs must always reflect a genuine pre-estimate of loss. They are not penalties and should never be used to punish contractors. If an LAD rate appears excessive compared to actual losses, it can be legally challenged. If a judge finds it disproportionate, the compensation amount may be reduced.
Sometimes, LADs are omitted from contracts. When this happens, the employer can claim actual losses through the courts. However, having LADs in place benefits both parties. It provides clarity on risks from the start and makes resolving claims faster and cheaper than a court battle.
When Can LADs Be Claimed?
LADs can only be claimed after the contract completion date has passed. This date is either the original deadline stated in the contract or a revised date granted through an extension of time.
Before claiming LADs, the Contract Administrator must issue a Notice of Non-Completion. Without this notice, LAD claims cannot proceed.
LADs are usually calculated per week. The final amount is determined after the work is completed. It is based on the time between the non-completion notice and the practical completion notice. The latter is issued once all contract work and required approvals are finished.
How Are LADs Claimed?
There are two ways to claim LADs:
- Track the value over time and deduct it from the final account statement.
- Adjust ongoing payments by issuing payless notices to deduct LADs from due amounts.
Clients are not required to claim LADs, even if they are in the contract. Many clients choose to waive them to maintain good relationships with contractors.
Need Help with LADs?
If the process seems complicated or you need expert advice, we’re happy to assist. Contact the Harrison Clarke team at 02381 55 00 51, and one of our surveyors will be glad to help.
