Section 170(3) of the Building Safety Act 2022 (the "BSA") sets out a number of provisions that come into force on 28 June 2022 – two months after the BSA received Royal Assent (28 April 2022).
Those changes include new protections for leaseholders against charges for cladding and fire safety remediation works, updates to the Defective Premises Act 1972; the Building Act 1984 and further rights of recourse against construction manufacturers.
We have all seen the stories of individual leaseholders facing bills of tens of thousands of pounds for remedial works and in some cases, declaring themselves bankrupt.
For the first time, qualifying leaseholders living in buildings above 11 metres tall or with at least five storeys will be legally protected from building safety costs:
- Qualifying leaseholders (those living in their own homes, or with up to three UK properties in total) will be protected, in full, from the costs associated with the remediation of unsafe cladding. They will also have protections from the costs associated with non-cladding defects, including measures like waking watches.
- It will be illegal for freeholders to pass on the cost of historical building repair works or the removal of cladding to any of their leaseholders, including non-qualifying leaseholders, if they are linked to the building's developer.
- It will be illegal for freeholders to pass on any historical building safety costs to qualifying leaseholders if they pass a prescribed wealth test.
- Where a developer cannot be held responsible and the building owner is not required to meet the costs in full, leaseholders with non-cladding related issues will also be protected by a cap on how much they have to pay for these costs, if the value of their property exceeds a certain amount.(leaseholders of properties below this ceiling will pay nothing). Where leaseholders have bought through shared ownership, their cap will reflect their share of ownership in the property.
Any costs that are not recoverable from leaseholders will need to be met by building owners and landlords. The Secretary of State, Michael Gove MP, wrote to freeholders yesterday setting out their new legal responsibilities and pointed out the consequences of non-compliance, including criminal sanctions.
See below for ways in which building owners and landlords may be able to recover the costs they are left to bear.
The Defective Premises Act 1972 (the "DPA")
It is a misconception that the changes which came in on 28 June 2022 apply only to high rise buildings and fire safety works – they are wider and more significant than that.
Prior to 28 June 2022, section 1 of the DPA required those involved in constructing dwellings to ensure that the dwelling is 'fit for habitation' when it is completed.
If, as a consequence of the way in which it is built, the dwelling was not considered fit for habitation, then a claim could be brought by the person who originally commissioned the work. A claim could also be brought by any person or entity subsequently acquiring an interest in the dwelling, such as the freeholder of a block, a homeowner, or a leaseholder.
Prior to 28 June 2022, a claim could only be brought to the extent it related to the 'provision' of a dwelling. This meant that any claim under the DPA was restricted to those original construction or conversion works.
Equally - prior to 28 June 2022 - any claim under the DPA needed to be brought within six years of the date of completion of those works.
Widening of the scope of the DPA
The BSA inserts new section 2A into the DPA. Section 2A expands the scope of the duties owed to any work carried out on a "relevant building" providing a right to claim under the DPA arising out of "any work undertaken on an existing dwelling, provided that work is done in the course of a business".
This means that claims arising out of any work undertaken on a dwelling which renders it unfit for habitation may be made, provided that the works are undertaken by a business (i.e. are being paid for and are not being undertaken by the homeowner or a friend, for example).
The Government's Redress Factsheet refers to liability under the DPA as being 'strict'. This means that no fault or negligence has to be shown in a claim.
If a building is not fit for habitation due to defective work, then a claim can be brought - there is no burden on the claimant to prove that the builder was at fault.
It is also not a valid defence in a claim under the DPA for the builder to claim to have followed established practice at the time. What needs to be shown to the court is that the dwelling was not fit for habitation at the time of completion of the works as a result of the work that was done. The Civil Liability (Contribution) Act 1978 might allow a defendant of a DPA claim to claim a contribution from another party involved in the works, but that will depend on the facts in question.
What remains to be seen in due course is whether the Courts will adopt this interpretation of the provisions – as this could have very far reaching consequences for those involved in constructing dwellings, both historically and in the future.
Extended civil liabilities
There are two changes being made to the time in which a claim under the DPA can be brought such that:
- For claims under section 1 and section 2A of the DPA, the limitation period has been extended from six to 15 years prospectively i.e. for any project which completes on or after 28 June 2022.
- For claims under section 1 only for works which were completed on historic projects from six to 30 years retrospectively.
Section.38 Building Act 1984 (the "BA")
Section.38 of the BA has been on the statue book since 1984, but has never been brought into force. It provides that a "breach of a duty imposed by building regulations so far as it causes damage" is actionable.
The BSA brings section.38 into force from 28 June 2022. In addition, the BSA also extends the limitation period for claims under section.38 to 15 years – this will only take effect prospectively (i.e. for buildings completed after 28 June 2022).
It is important to note that the BA is not limited to just dwellings/residential property but extends to all buildings within the remit of the Building Regulations.
The BSA provides a new cause of action against construction product manufacturers where a product has caused/contributed to defects in a dwelling. This new cause of action broadly follows the extended limitation periods for the DPA and section.38 BA, in that manufacturers of "cladding products" can be liable for:
- a retrospective period of 30 years for damage (personal, property and economic); and
- for all construction products, prospectively for a period of 15 years.
There are specific elements that have to be proven in bringing such claims being that:
- a product fails to comply with a construction product requirement (such as failing to comply with the regulations at the time);
- the manufacturer makes a misleading statement in relation to the capabilities of that product; or
- the product is determined to be inherently defective.
Given this is a new cause of action, it will be interesting to see how the Courts apply these provisions going forward.
The Government promised that the BSA would bring the biggest changes to building safety in more than 40 years and along with that, it has enhanced the rights for property owners, leaseholders and occupiers to bring claims in respect of defective work.
The extensions to civil liabilities, particularly those which operate retrospectively (including a new cause of action which operates retrospectively), are highly unusual and only time will tell what the true impact of these changes will be.
Regretfully, however, these provisions do not guarantee a remedy for those with defective homes or buildings. The relevant company may no longer exist or may be insolvent. Even if it is still trading, professional indemnity insurance policies may not respond in the event of claims as they usually only respond where there has been negligence. Since the Grenfell tragedy we have already seen insurers limiting or refusing to provide cover in respect of fire safety design and in light of the extension of limitation periods, this is likely to be even more prevalent. In those circumstances, claimants will be reliant upon the responsible party having sufficient financial means to pay up!