Following its second reading in the House of Lords, the Building Safety Bill (the “Bill”) is now in the committee stage. As the Bill edges ever closer to Royal Assent (which is anticipated in around July 2022), the changes which the Bill proposes to an almost fifty-year-old piece of legislation are set to cause a serious impact within the construction sector.
Before the Grenfell fire, it is likely that few homeowners were aware of the Defective Premises Act 1972 (“DPA”). In force since 1 January 1974, section 1 of the DPA places a duty of care on persons (including developers, builders, and consultants) carrying out work for or in connection with the provision of a dwelling to undertake such work using proper materials and in a workmanlike/professional manner so that the completed dwelling is fit for habitation. This strict duty is owed to both the original homeowner and to successors in title.
Currently, where there is a breach of s1 DPA, a homeowner must bring a claim within 6 years of completion of the dwelling or from any further works in relation to the defects. This relatively short limitation period has been a barrier for many leaseholders and building owners currently battling to have unsafe cladding and/or fire stopping defects remediated.
Accordingly, the Bill will introduce 2 key changes to the limitation period for claims under s1 DPA. First, going forward, homeowners will have more than twice the amount of time to claim compensation for sub-standard construction work, with the proposal for the limitation period for properties deemed unfit for habitation due to be extended to 15 years. Even more alarming for developers and consultants is that, as currently drafted, the Bill provides homeowners the ability to make retrospective claims (i.e. where a building has already been completed) for safety defects up to 30 years after completion of the dwelling.
In addition, where currently the duty under the DPA applies to new dwellings only, the Bill creates a new duty which will apply to existing dwellings (e.g. for refurbishment works), with a limitation period of 15 years for such claims.
While the Government’s intention in extending the limitation period and introducing the ability for homeowners to make retrospective claims under the DPA might be laudable, the potential impact of these changes could be immense. For example, can a defendant developer/builder/consultant be tried fairly in relation to a project completed 30 years ago where it is highly unlikely that the key details of such works required to mount a defence – including contract documents and relevant staff – are available some 30 years later?
The Bill does however include some safe safeguards for construction professionals, in particular requiring the Court to dismiss claims if the claim has already been settled or determined and if necessary to avoid breaching the defendant’s human rights, but it is currently unclear the context in which the latter defence could be deployed successfully.
For claimants, notwithstanding that the changes to the DPA provide an extended ability to pursue a claim, this is not the panacea it might appear to be in first light. Among other things, claimants still need to fund the cost of any claim, which will undoubtedly be burdened by the additional difficulties in locating information and evidence where considerable time has passed. Furthermore, there is still the need to prove that the construction professional breached its duty under the DPA with the significant hurdle of establishing that the property is unfit for habitation due to the defects. Even where the claimant might obtain the required evidence, the possibility that the original developer/consultant no longer exists (whether due to insolvency or dissolution) is a considerable risk.
Most concerning for all, the increased risk of claims has led to an extreme hardening in the insurance market. From cover on aggregate basis only and astronomical excesses, to complete lack of cover for cladding and/or fire-related works, and large increases in premiums for buildings insurance, in the current market it is near to impossible for some developers and consultants to obtain adequate insurance cover. Without insurance cover, what funds are likely to be available to service any claim, particularly where developers may not be able to take on any further work?
Based on the Government’s current transition plan, the changes to the DPA are expected to come into force within 2 months after Royal Asset. Thus, if all goes to plan, the industry is set to be hit by an influx of claims from this autumn.
As for longer-term impacts, clearly developers and construction professionals need to be ever more vigilant in ensuring they comply with regulations and to introduce stringent supervision of staff and sub-contractors, but equally it is essential to put into place robust contracts/appointments which limit liability to the extent possible and, where applicable, extend limitation periods to match those under the DPA. For those who have yet to invest in a long-term document retention policy, clearly one needs to be implemented immediately. And of course, contractors and consultants need to ascertain how they will price the risk of current and future projects given the additional requirements of insurers and the extended timeframe in which they could face a claim, all of which will undoubtedly add to the increasing costs for construction works.
The changes proposed to the DPA are clearly set to have a significant impact on the construction industry. While homeowners will gain greater recourse where their homes have such serious defects that they are not fit for habitation, as there is no proposal to extend contractual rights, they will have no redress for other defects however widespread. As well, for now, questions remain over the extent to which homeowners will be any better off if the effect of the Bill is a deluge of claims which push developers and construction professionals into insolvency. In the longer term it is hoped that the Bill will halt what many have described as a race to the bottom in the construction industry dating back to 1980s and 1990s. At the same time there should be real opportunities for developers and builders, particularly those that already pride themselves on producing the trouble-free homes which after all is the attraction in this market for new build purchasers.
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