United Kingdom | Publication | May 2022
Last month, we announced that the Building Safety Act (BSA) had received Royal Assent. A fortnight after Royal Assent, the government published the text of the BSA. At the time of publication of this alert, the accompanying explanatory guidance has yet to be published.
The purpose of this alert is to highlight the new and expanded causes of action and extended limitation periods which will be brought into effect on 28 June 2022.
The BSA represents the largest statutory intervention ever seen in the construction industry. The wide-ranging nature of the legislation and its anticipated impact across the built environment cannot be overstated.
The regulatory framework that underpins the BSA includes a large number of statutory instruments and regulations, all of which need to be separately implemented before the various provisions of the BSA can applied. As the BSA states (s168(6)), a number of such regulations may not be made unless approved by Parliament. Therefore, it may take up to two years for the whole BSA framework to be put into place.
The BSA covers a multitude of issues. Given its genesis in the Grenfell tragedy, a key focus of the new legislation relates to historical building-safety defects in residential buildings. The BSA also creates new leaseholder protections as well as new (and extended) remedies designed to pass on the costs to those responsible for the defective work.
In due course, the BSA will usher in a new regime of new-build home warranties (outlined in s144). These will require developers to provide a minimum 15-year warranty for new-build homes, in addition to existing properties where building work creates a new dwelling – such as the conversion of office space, or a large house into flats. Under s145, a financial penalty will be implemented where such warranties are not provided.
From 28 June 2022, two new concepts will come into effect: the Remediation Order (s123) and the Remediation Contribution Order (s124). These orders may compel relevant landlords to remedy specified defects that have arisen from construction or conversion work carried out within the period of 30 years up to 28 June 2022, and which cause a ‘building safety risk’ (defined in s120 (5)), which includes risks to the safety of people ‘in and about’ a building: from the spread of fire to the collapse of all, or part of a building.
We will consider the implications of these measures in a separate briefing.
In s134(1), the BSA introduces a new section 2A to the DPA. This extends the ability of homeowners (including leaseholders and landlords) to bring statutory claims under the DPA regarding refurbishment and rectification works carried out on existing dwellings where such work renders the dwelling ‘unfit for habitation’.
This represents a significant expansion in the scope of the existing DPA regime, to encompass new-builds and the conversion of buildings etc. Residents will be able to bring claims against contractors, designers and developers in respect of defective repair work. This was previously excluded from the DPA on the basis that the duty in section 1(1) (of the DPA) was restricted to the ‘provision’ of a dwelling – meaning its original construction or conversion.
2. New claims under Section 38 of the Building Act 1984
Although approved by Parliament almost 38 years ago, section 38 of the Building Act 1984 was never brought into force. Alongside the DPA changes, this will occur from 28 June 2022.
Section 38 provides a statutory right to claim compensation for physical damage (e.g. injury or damage to property) from those responsible for the damage caused, where such damage is caused by a breach of the Building Regulations.
The title of the BSA – specifically the reference to safety – belies the ambit of the legislation. Unlike the DPA and new construction products cause of action (see below), section 38 is not limited to dwellings or residential properties, but applies to all buildings within the scope of the Building Regulations.
However, it is important to note that section 38 only provides a cause of action for defects which are shown to have breached the Building Regulations and is limited to physical damage only. Damages for pure economic loss are not recoverable under section 38.
3. Building liability orders (s130)
Closely aligned with the above is the concept of a building liability order (BLO). Once the relevant provisions are in effect (ss130-132), the High Court will be empowered to issue a BLO which pegs the relevant liability of an original corporate body to an associated corporate entity.
The relevant liability in question is that incurred under the DPA; section 38 of the Building Act 1984; or arising as a result of a ‘building safety risk’. The effect is that, in certain circumstances, a party seeking a BLO will be able to pursue companies associated with the original contractor or developer. The BSA (s132) also provides assistance to potential claimants ultimately seeking the grant of a BLO, by allowing the right to apply to court for an information order which, if granted, would require a specified corporate body to disclose information relating to its corporate structure.
These new provisions represent a fundamental change in approach to the traditional English law principles of separate legal personality and piercing the corporate veil. Further details will be set out in secondary legislation.
4. Liability for construction and cladding products
A new cause of action appears within ss148-149 of the BSA to allow claims to be brought against any party who:-
This part of the BSA (liability relating to construction products) allows claims for damages to be brought against product manufacturers and suppliers in respect of personal injury, damage to property and/or economic loss by anyone who has an interest in the dwelling and has suffered a loss as a result of said dwelling being ‘unfit for habitation’.
The new provisions of the BSA will not only create new rights of action for building owners and leaseholders against manufacturers and suppliers, but may well come to the assistance of defendant contractors and consultants, enabling them to pursue contribution claims against cladding manufacturers and suppliers, who may be responsible for the same damage.
Under English law, the limitation period is defined as the time period within which one party can bring a claim against another for damages. The Limitation Act 1980 gives the defendant a complete defence if a claim is served after expiry of this period.
The BSA (s135(1)) adds a new section 4B into the Limitation Act 1980, thereby changing the limitation period within which building owners, homeowners and leaseholders can bring claims for defective work relating to a dwelling under the DPA:
Section 38 claims may be brought up to 15 years from the date of completed building works, but only in respect of buildings completed after 28 June 2022.
The BSA introduces a new section 10B into the Limitation Act (s150) which extends the liability period for construction products to 15 years from the date the right of action accrues (when the works are completed - ss148(8) and 149(8)).
In relation to defective cladding products, section 150(2) provides that the claimant is eligible for the 30-year limitation period where the right of action has accrued prior to 28 June 2022. However, if it accrues after 28 June 2022, the limitation period expires 15 years thereafter (s150(2)(b)).
Where claims are made retrospectively, this extended 30-year limitation period does not apply to claims that have been previously settled or that have received final determination.
The BSA also provides that the courts must dismiss a claim if it breaches the defendant’s human rights. This means that arguments may be raised that are based on the Human Rights Act 1998 and the European Convention on Human Rights.
The limitation periods applicable to claims under the DPA and s149 of the BSA (defective cladding products) will not expire until one year after the new law comes into effect. The BSA provides a one-year buffer for claimants who find themselves close to the end of the 30-year period.
| Subject matter | Prospective | Retrospective | Comments | |
|---|---|---|---|---|
| DPA 1972 | New dwellings and works to dwellings only | 15 years | 30 years |
s150 – One-year ‘buffer’ Relevance of Human Rights Act 1998 |
| S38 BA 1984 | All works to which BRs apply | 15 years | N/A | S38 to be brought into force |
|
New construction products cause of action ss147-155 BSA 2022 |
Dwellings only | 15 years | 30 years – just cladding defects | s150 – One year ‘buffer’ |
From 28 June 2022, these changes will significantly impact the construction sector (and supply chain) and those within the English domestic real estate market. This includes building owners, real estate asset managers and insurers, real estate funders and those involved in property disputes.
The BSA will afford additional rights to the subsequent owners of residential properties (within the scope of legislation) who had no contractual rights against the original developers and construction professionals.
The concept of a 30-year limitation period is unprecedented and will cause concern for developers, contractors and design professionals (and Personal Injury Insurers in an already tight market). The retrospective limitation period will also no doubt increase the volume of claims regarding historic defects dating back to 1992.
We anticipate a significant increase in DPA claims (which have historically seeing only moderate use in practice), as well as multiple-defendant claims, which will give rise to plenty of difficult issues around apportionment and contribution for lawyers to grapple with. The courts will also have to deal with the problem of ensuring the fair determination of claims when documentary records and evidence is likely to have been lost or destroyed decades ago.
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