The UK government introduced its revised Building Safety Bill (the "BSB"), which it claims represents the "next step in ground-breaking reforms to give residents and homeowners more rights, powers and protections – making homes across the country safer", for its first reading in the House of Commons on 5 July 2021.
One of these new "powers" is an extension to the time period within which homeowners, leaseholders and residents in England and Wales can bring proceedings under the Defective Premises Act 1972 (the "DPA"). The current six year limit will be more than doubled to fifteen years from completion of works.
Proceedings under the DPA can be brought against anyone "taking on work", or arranging for another to take in work, in relation to new dwellings and therefore claims can potentially be made against contractors, designers and developers. Crucially, this change will apply retrospectively meaning that, for example, occupiers of a building completed in 2012 will have until 2027 to raise an action.
There is no doubt that the objective of this change – to provide better protections to those who own or live in "unsafe" properties – is laudable. However, there are a number of practical points which those on both sides of any potential dispute will need to consider should the draft provisions of the BSB make their way on to the statute books.
Issues for contractors, designers and developers
- As noted above, the changes to the DPA will apply retrospectively. This means organisations who thought that old "problem" projects were off the books will now need to account for these going forward. Where businesses are already under financial pressure, this may cause further difficulties.
- Tied to the above, contractual obligations to maintain insurance post completion of works typically last for significantly less than fifteen years and appropriate coverage may no longer be in place. If an insurance policy has been allowed to lapse, the company in question will be left with a choice between either seeking to put a new policy in place or covering the costs of any potential claims themselves.
- The current market is also a very challenging one in which to find insurance coverage for cladding related issues. Coverage limits, aggregation clauses and high excesses are commonplace. The need for insurance policies to cover further historic projects, on a "claims made" basis, may make the market even more difficult.
- Going forward, these new legislative provisions represent a significant change to the risk profile of any project. Contractors, designers and developers will need to account for these additional risks when funding and pricing all works going forward.
Issues for Claimants
- Under the DPA, proceedings can only be successful where it is shown that the defects in question render a dwelling "unfit for habitation". It appears to be the government's intention that this will cover all claims relating to cladding issues. However, it is less than clear that the wording of the DPA goes this far. For example, some flats in a building which is partial clad in an unsafe Aluminium Composite Material (ACM) may well be fit for habitation, but the residents could still be liable for substantial costs associated with removing and replacing the cladding. Uncertainty will therefore remain for some property owners.
- In any claim, it will be for the claimants to prove that a dwelling is "unfit for habitation", with the consequent costs involved in instructing expert evidence to support this position.
- As noted above, it may be that professionals involved in the construction of the claimants' project no longer have professional indemnity insurance. Potential claimants will therefore have to weigh up the risks and costs of bringing a claim against the uncertain financial position of the potential defendants.
What happens next?
The government has indicated that it expects that the BSB will be granted royal assent by summer next year and that the various measures set out in the BSB will come into effect across the following 18 months.
Both occupiers of defective premises and the construction industry will have a keen eye on the progress of the bill (and any amendments made) to see what the final outcome will be.