Since its publication in draft last year it has been clear that the Building Safety Bill is going to have significant ramifications for the construction industry. This Law-Now focuses on two additional changes which became apparent on publication of the final Bill this week. Rights under the Defective Premises Act 1972 are to be expanded and the applicable limitation period increased from 6 to 15 years. A statutory right to claim in relation to breaches of the Building Regulations will also be brought into force with a 15 year limitation period.
The Building Safety Bill
This week, nearly a year after the Government published its draft Building Safety Bill for consultation, the Government introduced the Building Safety Bill which is making its way through Parliament. The initial draft of the Bill set out the Government’s plan to overhaul fire safety regulation in the wake of the Grenfell Tower fire in June 2017, introducing a new regulator, changes to the building control profession, a new regime for duty holders and more stringent sanctions amongst other matters. For an in-depth review of the draft Bill and its implications for the construction industry see our previous Law-Nows here and here.
In addition to these matters, the newly published Bill includes some important amendments which are designed to assist owners of properties with cladding defects. This Law-Now focuses on the legislative changes which have broader relevance to the construction industry: amendments to the Limitation Act 1980 which will extend the limitation period for claims under the Defective Premises Act 1972 (the “DPA”) and section 38 of the Building Act 1984 (“Section 38”) from 6 years to 15 years, amendments to the scope of the Defective Premises Act, and the bringing into force of Section 38 which provides a general right of action for breaches of the Building Regulations. We consider these proposals in more detail below.
The Defective Premises Act 1972
The DPA provides a statutory cause of action to owners of dwellings (including leaseholders and landlords) which are “unfit for habitation”. As currently drafted the DPA applies to persons “taking on work” in relation to new dwellings, and so includes both contractors and designers (although contractors have a defence where the work in question has been built to specification).
Two amendments are proposed to DPA rights under the amended bill. Firstly, the limitation period applicable to such rights is to be extended from 6 years to 15 years, meaning that claims can be brought under the DPA for works completed significantly earlier than has previously been the case. Secondly, the scope of the DPA will be widened to cover work in relation to existing buildings, provided they contain two or more dwellings.
A number of observations can be made about these proposals:
The retrospective change to the limitation period will come as quite a surprise to many contractors, designers etc who may have believed that they had a limitation defence in respect of many historic projects and will now be vulnerable to claims long after completion of the works. It will also inevitably have an impact on how those involved in construction view and manage their liability going forward.
The assumption behind these amendments is that the defects in cladding will satisfy the definition of making a dwelling unfit for habitation. Not all defects in cladding will meet that high bar. Further, in some cases contractors / developers / designers may seek to argue that the works complied with applicable Building Regulations in effect at the time and therefore the dwelling was fit for habitation when built in accordance with the prevailing knowledge and practice. The success of this argument will depend on the extent to which the DPA is interpreted as imposing strict liability. Court guidance is likely to be needed.
Whilst specifically aimed at cladding defects, the amendments to the DPA will apply more broadly to any work falling within the enlarged scope of the Act which renders a dwelling unfit for habitation.
Whilst the changes will be welcomed by owners of dwellings with cladding defects, the costs of pursuing claims, uncertainties as to how the DPA will apply to cladding defects, and the financial condition of companies subject to claims may dissuade some from taking advantage of these new rights.
Section 38 of the Building Act 1984
Section 38 provides for a statutory right of action to anyone suffering damage as a result of a breach of the Building Regulations. This provision has been on the books for a while but is not yet in force. The explanatory notes published with the Bill state that the Government intends to bring this provision into force and, further, that the applicable limitation period will be 15 years.
This change will only provide a cause of action for those cladding defects which can be shown to have been breaches of the Building Regulations applicable at the time the works were undertaken. In addition, Section 38 is likely to have wide-reaching consequences for other construction related claims in the future. The Building Regulations cover a wide range of building elements and are not limited to fire spread or habitability. Anyone suffering damage as a result of a departure from the Regulations will now have a cause of action lasting 15 years from the date of breach.
The Government has provided an indicative timeline for the introduction of these changes. This confirms that due to the “large and complex” nature of the Bill it expects passage to take no less than 9 months.
Further it has identified those changes which it intends will come into force within the first 12 months (these include establishing the Residents’ Panel within the Building Safety Regulator, extending the limitation period of the Defective Premises Act 1972 retrospectively - and applying this Act to refurbishments prospectively and changes to the Regulatory Reform (Fire Safety) Order 2005) and those changes which will come into force within 12 to 18 months of the Bill receiving Royal Assent (these include establishing the Building Advisory Committee within the Building Safety Regulator to help it perform its functions to oversee the safety and performance of all buildings and a targeted developer levy, which will apply only when developers seek building control approval to develop certain high-rise residential and other in scope buildings in England).
Conclusions and implications
The Bill will give a significant boost to homeowners wishing to claim against designers, contractors and developers in respect of cladding defects, particularly to those who can show that the defects were breaches of the Building Regulations in force at the time of construction. More generally, however, the proposed changes to the DPA and the bringing into force of Section 38 with a 15 year limitation period are likely to have much wider implications for the construction industry going forward. Projects will have a longer liability “tail” than previously has been the case, with exposure to a broader class of stakeholders. This may in turn put upward pressure on the pricing of construction work and the insurances needed to allow work to proceed.
Further comment on the changes introduced by the Building Safety Bill will be covered in future Law-Nows.
References: Amended Building Safety Bill