A recent decision from the TCC has provided helpful guidance on the application of the Defective Premises Act 1972, which provides a potential right of recourse for owners and purchasers of domestic dwellings against building contractors and other construction professionals where the absence of a contractual relationship would otherwise make a claim impossible.  The decision will be of interest to developers, contractors, construction professionals and anyone else involved in residential developments.

Background

A developer, City Wall Limited, engaged Barr Limited to build two apartment blocks in Leeds.  Barr indicated that for the development to come within City Wall’s budget, Barr would need to make significant reductions to the quality of the finishes and insisted on having a fairly free hand to make changes to the specification.  Many of the apartments were sold off-plan.  Practical completions of the apartment blocks were achieved in July 2005 and January 2006.

The quality of the finishes was poor and defects, such as leaks, mould and condensation in the common parts and within individual apartments soon became apparent.  The owners had limited options because (1) they did not have the benefit of new home warranties, (2) they had no contract with Barr and (3) City Wall was in administration.  Accordingly, the owners of 120 apartments brought proceedings against Barr under the Defective Premises Act 1972 (the “DPA”). The DPA imposes a duty on any person taking on work for or in connection with the provision of a dwelling to see that the work which he takes on is done to an appropriate standard so that the dwelling will be fit for habitation when completed.

Decision

Much of the judgment turned on the facts of the case and the condition of individual apartments.  However, the court also considered the following issues arising under the DPA:

1. What constitutes a “dwelling”? 2. What “in connection with the provision of a dwelling”means? 3. What standard of design and workmanship is required? 4. What constitutes “fit for habitation”?

“dwelling”

The court rejected the owners’ argument that the two apartment blocks together, or even each block on its own, constitute a single “dwelling” for the purposes of section 1 of the DPA, and instead found that a “dwelling” is an individual apartment demised to an individual owner in the lease.  The court reached its conclusion on the basis that exclusive possession of a particular space is an appropriate indicator of what constitutes a dwelling.  On that basis, whilst a balcony of which an individual owner enjoys exclusive possession could form part of his dwelling, the common parts of the apartment blocks could not.

“in connection with the provision of a dwelling”

Despite its conclusion that common parts did not form part of a dwelling, the court found that the work done to the structural and common parts of both apartment blocks was done “in connection with the provision of a dwelling”, and so Barr did owe a duty under section 1 of the DPA to the owners.  This was because the owner of every apartment has (1) an interest in and financial responsibility for the maintenance and repair of the structural and common parts of both apartment blocks and (2) a right of access to the common part of both apartment blocks.

Standard of design and workmanship

Under section 1 of the DPA, work must be done in a workmanlike or professional manner, and with proper materials.  The design and workmanship must be judged by the standards prevailing at the time that the work was done.  The court noted that even if a defect could be remedied at a relatively modest cost, its presence could still make a dwelling unfit for habitation.  The cost of remedial works will, however, be relevant to questions of mitigation and measure of damages.

“fit for habitation”

A dwelling will be fit for habitation within the meaning of section 1 of the DPA if, on completion:

  • it is capable of occupation for a reasonable time without risk to the health or safety of the occupants; and
  • it is capable of occupation for a reasonable time without undue inconvenience or discomfort to the occupants. 

What is a reasonable time will be a question of fact; it may be as long as the design life of the building where the nature of the defect is serious (e.g. defective structure or foundations). 

A dwelling must be fit for habitation by all types of person who might reasonably be expected to occupy it, including babies and those who suffer from common health conditions.

Where there is more than one defect, the appropriate approach is to consider whether the dwelling as a whole is unfit for habitation; it is not right to consider each of the defects in isolation.

A dwelling may be unfit for habitation even if the defect which makes it so is not evident at the time of completion (for example defective foundations).  Claims are able to be brought, therefore, where it can be shown that serious defects will manifest themselves in the future before the expiration of a reasonable time (for example, structural failures likely to manifest halfway through the design life of the building). Similarly, serious inconvenience that is not transient, such as a broken lift in a high rise building, may make a dwelling unfit for habitation.

Practical implications

With a recent boom in residential developments, this decision will be of particular interest to developers, building contractors, construction professionals as well as home owners.  Developers will often have flexibility to change specifications and the quality of the finishes as a development progresses.  The DPA is not intended to compensate home owners for the loss of a bargain and any aesthetic consequences of such changes will not be actionable under the DPA.  However, where defects arise that make a dwelling unfit for habitation, the DPA may impose liability on building contractors and other construction professionals where the lack of contract would otherwise make a claim impossible. 

The court’s interpretation of the “fit for habitation” requirement under the DPA shows that it has a potentially wide-ranging application, with claims able to be made in relation to life-span issues where a dwelling is likely to become unfit for habitation at an unreasonably early point in time in the future.

As the duties imposed by the DPA cannot be contracted out of, it is important that parties appreciate its potential consequences and manage the risk, for instance, by procuring new home warranties or agreeing a specific risk allocation with their employer. 

Reference: Rendlesham Estates plc & others v Barr Limited ([2014] EWHC 3968 (TCC)