Construction Disputes in 2025: What Contractors and Developers Need to Know

Construction disputes continue to be a fact of life for contractors and developers, but the landscape in 2025 presents new twists on familiar problems. The industry is navigating a mix of ongoing issues, such as payment conflicts and project delays, against a backdrop of evolving regulations and economic pressures. From the UK’s post-Grenfell building safety regime to the ripple effects of high material costs and contractor insolvencies, it’s more important than ever for construction professionals to stay proactive about dispute avoidance and resolution. In this timely overview, we highlight common pitfalls in today’s market, the growing role of adjudication, and how increased regulatory enforcement is shaping the way disputes are handled. The goal is to equip contractors and developers with practical knowledge to manage disputes effectively and keep projects on track in 2025’s challenging environment.

The Evolving Landscape in 2025

Several trends and developments are influencing construction disputes this year. Economically, contractors continue to face tight margins due to earlier surges in material prices and ongoing supply chain uncertainties. Inflation and higher interest rates have increased project financing costs, sometimes resulting in cash flow strains. It’s no surprise that the construction sector has seen a high rate of business insolvencies – in fact, it had the highest number of company insolvencies of any sector in England and Wales over the 12 months to late 2024. This trend is expected to continue into 2025, meaning many projects will face the risk of a party in the supply chain going bankrupt mid-project. An insolvent main contractor or key subcontractor can quickly turn into a web of disputes over unpaid bills and incomplete work.

On the regulatory front, the Building Safety Act 2022 (BSA) and related reforms are now largely in force, ushering in the biggest shake-up of building regulation in a generation. Contractors and developers are subject to significantly stricter safety obligations, particularly for high-rise residential projects. By 2025, new building control regimes (like the three-stage “Gateway” process for higher-risk buildings) will be fully operational and, admittedly, cause some growing pains – projects have had to factor in substantial delays to accommodate the new approval processes. There’s also an indication of further reforms on the horizon: inquiries and government responses following the Grenfell Tower tragedy are pushing additional changes, potentially expanding the definition of “higher-risk building” to bring more projects under the tougher regime. For developers, this means that more diligence is needed to remain compliant, and failures to meet the new standards can trigger not only safety risks but also legal disputes and liability. Indeed, we are already seeing litigation related to building safety defects and the use of improper materials, with courts issuing remediation orders and even personal liability orders to enforce the new rules.

In summary, the construction dispute climate in 2025 is one where old issues, such as payment delays, intersect with new pressures, including regulatory compliance and economic uncertainty. Projects are still getting built – in fact, government infrastructure drives and post-pandemic development have kept the sector busy – but contractors and developers must be more vigilant than ever about the contractual and legal aspects of their work.

Common Pitfalls and Sources of Dispute

Most construction disputes still boil down to a few common problem areas. Understanding these can help project stakeholders avoid or mitigate conflicts before they escalate. Here are some of the top culprits in today’s market:

• Payment Disputes: Cash flow is the lifeblood of construction, and disputes often arise when payments don’t flow as expected. Typical scenarios include late or non-payment of invoices, disagreements over stage payments (e.g., whether a milestone has been achieved), and issues with retention funds being wrongfully withheld. Variations to the work can also spark conflict if one side believes extra work was done and deserves payment, while the other disputes the value or whether it was authorized. In fact, in the construction industry, it’s not uncommon to see disputes over final account valuations or developers withholding payment due to defects. Such payment conflicts are so prevalent that the UK’s Construction Act (Housing Grants, Construction and Regeneration Act 1996) was specifically designed to improve payment practices and provide parties with a quick means to resolve non-payment issues. Still, delayed payments and underpayments remain a leading cause of disputes. Contractors should be careful to submit payment applications correctly and on time, and to follow contract notice requirements – failing to do so can jeopardize your right to payment or to contest deductions.
• Variation and Scope Changes: Construction projects often evolve from the original plan. When changes to the scope of work (variations) are not managed well, disputes ensue. A contractor might perform extra work believing it’s a paid variation, while the client might view it as within the original scope (or not properly instructed). These scope disagreements can lead to hefty claims or refusals to pay. The pitfall here is usually poor documentation: every change should be confirmed in writing as a contract variation, including any cost or time impact. In 2025, with supply chain hiccups still possible, we also anticipate disputes over the substitution of materials or methods when original specifications cannot be met – again, clear communication and a written agreement are key to avoiding misunderstandings.
• Project Delays and Extensions of Time: Almost every large project faces delays, but disputes often arise over who is responsible and whether the contractor is entitled to an extension of time (EOT) to avoid incurring liquidated damages. Common pitfalls include contractors failing to provide timely notice of delay events (as required by the contract) or owners improperly attempting to enforce delay damages even when they contributed to the holdup. Delay claims are highly technical, involving schedules, critical path analyses, and other factors, and they frequently result in claims for additional compensation for prolonged site overheads or disruption costs. Both sides should keep detailed records (daily reports, correspondence) to substantiate their position if a delay claim arises. In today’s climate, delays may stem from late design information, labor shortages, or regulatory approval delays (such as those at Gateway points under the BSA). Understanding what your contract states about these scenarios (force majeure, compensation events) is vital, so you follow the correct procedure to claim additional time or cost.
• Defective Work and Quality Issues: Quality disputes arise when the finished work fails to meet the expected standard or specifications. A developer might claim that the contractor delivered defective work (for example, structural elements not up to specification or finishes of substandard quality), while the contractor might dispute the allegation or blame design issues or subcontractors. These disagreements can escalate into claims for remediation costs or even contract termination. A common pitfall is not addressing defects promptly – small issues can escalate into significant legal claims if left unaddressed. Under many contracts, contractors have the right to return and rectify defects (during the defects liability period) – doing so can help avoid a dispute. In 2025, there’s an added layer: defects that implicate safety (e.g., fire-stopping defects, cladding issues) are under intense scrutiny due to the new regulatory environment. Such defects can lead not only to private disputes but also to regulatory action. Ensure rigorous quality control and a swift response plan for any defects that arise.
• Contract Management and Notices: Many disputes can be avoided with effective contract administration. Failing to send required notices (for extra work, delays, or payment issues) on time or in the correct form is a classic mistake that can weaken a party’s legal position. For example, a contractor who doesn’t submit a timely notice for an extension of time might lose the right to that extension, even if the delay wasn’t their fault. Similarly, an employer (client) who doesn’t issue a pay-less notice in time might be obligated to pay the full amount requested, even if they had grounds to withhold some money. These procedural pitfalls continue to trap unwary parties. In the current digital era, it’s wise to use project management software or, at the very least, email read receipts to have clear evidence of communications. Being proactive and organized in contract management – tracking deadlines, using the correct clauses, and maintaining accurate records – is one of the best ways to prevent minor issues from escalating into major disputes.

In summary, the common dispute flashpoints – money, time, scope, quality – haven’t fundamentally changed. However, the stakes in each may be higher in the context of 2025’s tight finances and stricter oversight. Contractors and developers who recognize these pitfalls can take early action: draft clearer contracts, foster open communication on site, and involve legal advisors at the first signs of trouble rather than when it’s too late.

Adjudication: Fast-Track Resolution for Construction Disputes

When disputes do arise, one of the most important tools at a contractor or developer’s disposal is adjudication. In the UK (and many other commonwealth jurisdictions), adjudication has become the go-to method for quickly resolving construction disputes, especially those involving payments. It is a fast-track dispute resolution process in which an independent adjudicator is appointed to provide a decision within a tight timeframe (typically just 28 days from referral). Crucially, the Construction Act 1996 gives most parties in construction contracts the right to adjudicate “at any time” – meaning if you’re not getting paid or have another quarrel, you can start adjudication and obtain an interim legally binding decision in roughly a month’s time. This is incredibly valuable in keeping cash flowing and projects moving, rather than being stuck for months or years in litigation or arbitration.

In 2025, adjudication remains as vital as ever. The Technology and Construction Court’s latest annual report showed that adjudication enforcement cases are the single largest category of new cases in that court – a testament to how frequently adjudication is being used and the fact that parties often need the court’s help to enforce adjudicators’ decisions when the losing side doesn’t voluntarily comply. We’re also seeing adjudication being utilized for an expanding range of issues. Traditionally used for payment disputes (like unpaid invoices or change order valuations), adjudication is now being applied to things like defect claims and even fire safety disputes. A recent High Court judgment confirmed that claims under the Defective Premises Act (e.g. related to building safety defects) can be decided by an adjudicator if they arise out of the construction contract, reinforcing the broad scope of adjudication. This is good news for parties dealing with urgent safety issues – they might not have to wait for lengthy court proceedings to get a decision on who is responsible and who must pay for remediation.

For contractors and developers, the benefits of adjudication are speed and cost-effectiveness. It’s often described as “pay now, argue later” – the adjudicator’s decision is binding immediately, though either party can still take the matter to arbitration or court for a final decision if unsatisfied. In practice, however, most adjudication decisions are ultimately accepted (perhaps after some negotiation), and they bring a measure of closure and cash flow relief when it’s needed most. To make the most of adjudication, parties should be prepared. Keep your documentation organized so you can quickly compile evidence and arguments when a dispute arises. Also, be aware that the timetable is very tight – you might only have a week or so to respond once the adjudication starts. Professional legal advice is recommended for drafting submissions, given the stakes. Fortunately, because adjudication is routine in the construction industry, specialist lawyers and claims consultants are readily available to help, often for a fixed fee. The bottom line is that adjudication provides a lifeline for contractors in particular – there is no need to wait years chasing a debt or resolving a dispute; you can obtain a decision and enforce your rights within a matter of weeks.

Regulatory Compliance and Enforcement: A New Front in Disputes

A distinguishing feature of the current construction climate is the emphasis on regulatory compliance, and the fact that failing to comply can lead not only to fines or penalties but also to project disruptions and disputes. Two areas stand out: building safety regulations and health & safety law on construction sites.

Following the Grenfell Tower fire, the UK implemented comprehensive changes through the Building Safety Act (BSA) and related regulations. In 2025, we are seeing these new rules being actively enforced. For example, the government and regulators are utilizing powers such as Remediation Orders (ROs) and Remediation Contribution Orders (RCOs) to compel building owners and developers to rectify historic safety defects in high-rise buildings. In one case, an RO was issued requiring a freeholder to remediate fire safety issues by a set deadline, and an accompanying RCO made the original developer (and associated companies) liable for over £13 million to fund those repairs. This shows that regulators and tribunals are not hesitating to put financial and legal responsibility on those involved in past construction where serious defects are found. Additionally, courts have issued Building Liability Orders to extend liability to related entities in corporate groups for building safety claims. What this means for current contractors and developers is that the stakes for getting it right are higher – sloppy compliance with building regs or cutting corners on safety can lead to legal orders down the line, even criminal liability in some cases. It’s a fertile ground for disputes: a contractor might be in conflict with a developer over who bears the cost of suddenly required remediation, or landlords may pursue contractors for contributions under the new laws. Everyone involved in constructing a building must now be aware that regulatory oversight is intense and ongoing. Allocating responsibility for things like post-completion safety issues in your contracts (through indemnities or insurance) is increasingly important.

On the health and safety front, site practices are closely monitored by the Health & Safety Executive (HSE). The HSE has been actively inspecting sites and prosecuting violations, and the fines can be steep – often based on a company’s turnover. Over the last year, there’s been a notable concentration of prosecutions related to dust exposure on construction and manufacturing sites, for instance. In one recent case (publicized in April 2025), a London property developer was fined £63,000 plus costs after the HSE found they had failed to protect workers from significant dust hazards on a construction site. The company had received multiple enforcement notices and still fell short, resulting in prosecution. Similarly, construction firms have faced six-figure fines for incidents like fatal accidents or major safety lapses. The message from regulators is clear: non-compliance will have serious consequences. HSE inspectors commonly issue improvement or prohibition notices; if those are ignored, prosecution is almost certain.

For contractors and developers, HSE enforcement can indirectly lead to disputes or legal issues within a project. For example, if a site is shut down by a prohibition notice due to unsafe practices, that delay could lead to contractual disputes between the contractor and client (each blaming the other for the situation). Or if an accident occurs, there may be internal disputes about who was at fault (main contractor vs. subcontractor) in addition to the regulatory investigation. To avoid these scenarios, it’s critical to prioritize compliance and risk management by ensuring all site staff are trained and follow safety procedures, maintaining documentation of safety measures, and rectifying any issues as soon as they are identified. Not only does this avoid fines and sanctions, it also builds a strong position should any dispute arise, since you can demonstrate you took all reasonable steps to comply.

In a broader sense, regulatory compliance has become a crucial aspect of project governance. Environmental regulations, planning conditions, and building codes have teeth. Non-compliance can halt projects (through stop-work orders) or result in expensive retrofit works later. Thus, in 2025, savvy developers include legal review of compliance at various project stages. Likewise, contractors often consult with specialist lawyers when navigating unclear regulatory requirements, to ensure they don’t inadvertently expose themselves to future liability. It’s an extra upfront cost, but one that can save you from nightmare disputes down the line. Remember that a dispute with an authority (like HSE or a building regulator) can be just as damaging as a dispute with a client – both can cost money and reputational damage. The key takeaway is that compliance is not just a box-ticking exercise; it’s part and parcel of dispute avoidance in today’s construction industry.

Best Practices for Avoiding and Managing Disputes

While you can’t eliminate all risk of conflict in construction projects, there are several practical steps contractors and developers can take to greatly reduce the likelihood of disputes or to handle them more effectively when they occur:

• Invest in Clear Contracts: A well-drafted contract is the foundation for preventing disputes. Use standard forms (like JCT or NEC in the UK) appropriately amended to fit your project, or have a bespoke contract reviewed by legal experts. Clarity on scope, payment terms, change procedures, and risk allocation (for unforeseen events such as ground conditions or price fluctuations) will leave less room for later disagreement. Ambiguities in contract documents are a frequent source of claims – ironing them out at the start is far easier than fighting over their meaning later.
• Document Everything: Make it a habit on the project to contemporaneously document key events and communications. If a problem arises – such as a design change or a delay event – record it in a notice or email with relevant details (including dates, cost impact, etc.). Keep site logs up to date. This creates a paper trail that could be invaluable evidence if a dispute escalates. It also often deters the other party from taking an unreasonable position when they know the facts are well-documented. Many disputes are “he said, she said” situations; good records tilt the odds in your favor.
• Follow Contract Procedures (Especially Notices): We touched on this in the pitfalls section, but it bears repeating: strictly follow the contract’s requirements for notices and other procedural steps. If a contract requires notice of delay to be given within 7 days of the delaying event, comply with it. If payment applications are due on the 25th of each month, don’t be late. Complying with these timelines and formalities ensures your rights are protected. Non-compliance can result in losing entitlement to an EOT or additional payment, effectively meaning that a dispute may never even begin. Assign someone on the team to be responsible for maintaining a contract compliance checklist to prevent inadvertent missteps.
• Communicate and Attempt Amicable Resolution: Many disputes can be resolved early and amicably through frank communication between the parties. If an issue is brewing (e.g., a subcontractor consistently delays work, or the client isn’t happy with some workmanship), address it at a senior-level meeting. Sometimes, a without prejudice discussion (off-the-record negotiation) can resolve a dispute before positions harden. Consider mediation as a first step if direct talks stall – a neutral mediator can often guide parties to a settlement in a day or two, saving relationships and future business opportunities. In 2025, with everyone aware of legal costs and reputational matters, there’s a trend of a higher willingness to explore mediation or other alternative dispute resolution methods before rushing into adversarial proceedings.
• Use Adjudication or Expert Determination for Quick Issues: If a dispute is discrete and monetary (such as resolving the unpaid £100k certificate), adjudication is usually the best step, as discussed. For very technical issues, sometimes contracts allow an expert determination (having a neutral expert decide a matter, such as an engineer for a technical design issue). The point is to match the dispute resolution method to the problem – don’t litigate a simple payment claim that could be adjudicated in 28 days; conversely, don’t try to adjudicate an extremely complex multi-party dispute without considering if that will truly settle matters. Seek legal advice on the most suitable forum for your specific situation.
• Stay Informed on Legal and Regulatory Changes: As we’ve seen, new laws and court decisions can directly impact your rights and obligations. Subscribe to construction law updates or engage advisors for periodic briefings. For instance, being aware of the latest case law on the Building Safety Act or on how courts treat concurrent delays can help you adjust your contract strategies and project management to avoid known pitfalls. In 2025, with new building safety regulations still rolling out and case law evolving, knowledge is power. My Commercial Lawyers and similar specialist firms regularly publish insights – taking advantage of those resources can keep you a step ahead.
• Consider Fixed-Fee Legal Services: Dispute management often requires the involvement of lawyers, which can be daunting due to cost uncertainty. One innovation in the market is the offering of fixed-fee packages for specific dispute resolution services. This can be particularly useful for SMEs and contractors – you get clarity on what you’ll pay, which helps you pursue rightful claims without fear of runaway legal bills. (Our firm, for example, prides itself on transparent fixed fees, so clients know the cost at each stage of a dispute.) When legal spend is predictable, it’s easier to make the call to enforce your rights rather than write off a loss. Don’t shy away from seeking legal help early; many firms will have an initial consultation at low or no cost, and early advice might save you heaps of trouble down the road.

By implementing these practices, contractors and developers can significantly reduce the frequency and severity of disputes. The construction process is inherently complex and will never be completely claim-free, but many issues are manageable if approached correctly. Remember that the goal is to complete projects successfully, not to “win” disputes. A fair and proactive approach to problems – backed by sound contract management and timely recourse to resolution mechanisms – is often the best formula for completing a project with relationships and profits intact.

Conclusion

The construction industry in 2025 faces its share of challenges, but these challenges also present opportunities to build stronger projects and business practices. Disputes over contracts and commercial issues will never disappear entirely – whenever there’s money, time, and quality at stake, disagreements can happen. However, as we’ve discussed, understanding the common pitfalls (payment issues, scope changes, delays, defects) allows parties to guard against them. Embracing tools like adjudication for swift dispute resolution can help keep a project on track and maintain cash flow when it’s most needed. Equally important is recognizing the new dimension of regulatory compliance: today’s contractors and developers must treat safety and legal regulations as top priorities, not only to avoid penalties but to prevent disputes and liability down the line.

In these dynamic times, those in the construction sector should strive to be proactive problem-solvers. That means investing in clear contracts, fostering open communication, and seeking expert guidance when necessary. It also means being prepared to act – whether it’s initiating an adjudication to get paid or quickly responding to a compliance issue before it escalates. By staying informed about industry developments (from the latest Building Safety Act requirements to recent court rulings), contractors and developers can make better decisions and avoid being caught off guard.Ultimately, the successful navigation of construction disputes in 2025 hinges on a blend of technical expertise and legal acumen. The projects that will thrive are those managed by teams who appreciate both good building practice and good contract practice. With the right approach, even if disputes arise, they can be handled efficiently, allowing all parties to focus on what they do best: delivering high-quality construction projects. As always, when in doubt, consult with experienced construction law professionals who can provide tailored advice (often on a cost-effective fixed-fee basis) to guide you through any contentious issues. By taking these steps, contractors and developers can face the uncertainties of 2025 with confidence, knowing they are well-equipped to address whatever challenges arise.