At DTM Legal, we support developers, contractors and consultants across the full lifecycle of construction and engineering projects. We advise on and document novation agreements, ensuring responsibilities, liabilities and deliverables transfer clearly and correctly when a project changes hands.
Novation is a common feature of modern procurement, particularly where a project moves from an employer to the contractor or when needing to replace a contractor. Done properly, it helps maintain momentum on site and preserves the value of the work already completed. Done poorly (or left too late), it can create uncertainty over who is responsible for what, weaken your legal protections, and increase the risk of disputes.
What is a Novation?
A novation is a legal mechanism that transfers a contract from one party to another. In construction, this most often involves novating a professional consultant’s appointment (for example, an architect or engineer) from the employer/developer to the design-and-build contractor.
Importantly, novation is not the same as assignment. Novation typically involves:
- a new contractual relationship with the incoming party; and
- an agreed framework for what happens to rights, obligations and liabilities (including what remains with the outgoing party, if anything).
Types of Novations We Can Assist With
We advise on a range of novation scenarios and documents, including:
- Consultant appointment novations (architectural, engineering, MEP, structural/civil, planning, surveying, project management)
- Partial novations (for example, limited to specified services, stages, or deliverables)
- “Switch” / conditional novations triggered at a defined point (e.g., contractor appointment, funding drawdown, completion of Stage 3/4)
- Bespoke tripartite novation agreements aligned with your wider contract suite
- Novation and related third-party protections, including collateral warranties and third-party rights provisions (where funders, purchasers or tenants require them)
We can support novations alongside commonly used industry forms and bespoke project documentation, ensuring your novation is consistent with related contracts, scopes, programmes and stakeholder requirements.
When is Novation Used?
Novation is frequently used where:
- the employer appoints the professional team initially to develop the design; then
- the project moves to a design-and-build model; and
- the contractor needs control of the design team and their ongoing design responsibility.
Novation may also arise where a project is restructured (e.g., changes in project ownership, group companies, JV structures), or where funder requirements or procurement strategy evolve.
Key Considerations When Putting a Novation in Place
We help ensure your novation reflects the commercial reality and protects your position, including:
- Timing and “handover point”: agreeing when the novation takes effect and what happens to work completed before that date
- Scope and deliverables: ensuring the consultant’s responsibilities are clear both pre- and post-novation
- Liability position: clarifying who can pursue claims for pre-novation breaches, and whether any liabilities remain owed to the employer after novation
- Standard of care: ensuring professional obligations remain appropriate and are consistent with the broader project risk profile
- Fees and payment: dealing with outstanding invoices, future fees, variation mechanisms and payment timelines
- Insurance: confirming PI requirements, duration of cover and evidence obligations
- Intellectual property: ensuring the right parties have licences to use design documents and BIM/digital deliverables, including in the event of termination
- Information and document transfer: managing deliverables, design packs, warranties, certificates and approvals so there is a clean transition
- Collateral warranties / third-party rights: preserving funder, purchaser and tenant protections and ensuring novation does not undermine stakeholder requirements
- Consistency across the contract suite: aligning the novation with the building contract, scope documents, design responsibility matrix, and dispute resolution provisions
Where a novation is anticipated from the outset, we can also help you structure the original appointments and wider project documents to reduce friction later on.
Benefits of a Properly Drafted Novation Agreement
A well-documented novation can deliver real project and risk-management benefits, including:
- Clear allocation of design responsibility as procurement shifts
- Reduced uncertainty over who instructs and manages the professional team
- Better programme continuity, avoiding delays caused by re-procurement of services
- Stronger contractual clarity, helping prevent disputes over scope, liability and payment
- Greater confidence for stakeholders where protections are documented and maintained
Costs can vary depending on the number of novations, the complexity of the project structure, and stakeholder requirements (for example, funders or end users). We offer transparent pricing and can provide a clear estimate once we understand your procurement route and timescales.
Speak with a Member of the DTM Legal Team
If you need support preparing or negotiating a novation agreement or want to put the right structure in place early so novation is straightforward later, our team is here to help. Contact our Construction & Engineering team to discuss your requirements by calling 01244 354800 / 0151 3210000 or emailing construction@dtmlegal.com.
