The Building Safety Bill: better redress for homeowners? Part 1

Philip Britton LLB BCL is a Former Visiting Professor and Director, Centre of Construction Law and Dispute Resolution, King’s College London; former Senior Fellow (Melbourne Law Masters); co-author with Matthew Bell of Residential Construction Law (Hart Publishing, 2021)

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Philip Britton

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The Building Safety Bill: improving redress?

Reform, however well-intentioned, which affects part only of a problem may not be enough to alleviate the whole problem, though the reformer may feel that they have achieved something of value. So it is with the Department for Levelling Up, Housing and Communities (DLUHC); its Building Safety Bill (BSB) primarily aims better to prevent building defects. But recently added changes to the Bill – the focus of this pair of posts – concern cure: the law’s response to work which is not compliant with the mandatory external standards of ‘the building code’.

Those changes which extend ‘rights of action’ – the power to sue in a civil court – are in my view worth having. However, they fail to meet the most urgent need – for reliable and fair ways to fund and organise the rectification of non-compliant features (primarily, but not uniquely, cladding and insulation) in private sector residential tower blocks. More fundamentally, merely to arm a homeowner or others with additional rights is to ignore the real obstacles and disincentives which lie in wait procedurally for such a claimant. Part 2 of this post considers the difficulties of enforcing such rights – and a further relevant BSB change on the limitation period.

 

Photo by Ivan Henao on Unsplash

 

Neither post discusses defects in work done by someone with whom the homeowner is (or was) in contract: such a claimant usually meets fewer obstacles than if they have no such legal link with the target defendant (the more usual situation). Nor do I consider short-term rental tenants, whose housing quality is separately protected by statute against landlords (see, especially, ss 8-17 Landlord and Tenant Act 1985).

Extending liability under the Defective Premises Act: how valuable?

The BSB proposes extending the scope of the Defective Premises Act 1972 s 1. At present, this protects those who own (or have leases of) dwellings in England & Wales, against actionable harm caused by anyone who has ‘tak[en] on work [liability derives from the particular work each potential defendant takes on] for or in connection with the provision of a(n) [entire] dwelling’ – by new-build, conversion or otherwise. In 2019 the Court of Appeal held in Herons Court v Heronslea Ltd that those who merely inspect plans and work in progress are not actively ‘providing’ the dwelling (discussed here) . So the DPA does not ‘bite’ against those operating Building Control (private or public sector), even if they can be shown to have failed to prevent the defects; nor (usually) does the common law of negligence. Those taking on this revamped function under the new BSB regime will not be treated any differently, at least under the DPA.

Non-compliance with Building Regulations does not automatically lead to liability under the DPA; instead, this rests on failure to do the work ‘in a workmanlike or, as the case may be, professional manner’ (which does not directly require proof of fault), but in every case the dwelling’s unfitness for habitation must be shown (a high threshold for damp and cold, but easily reached for construction threatening inhabitants’ lives through the risk of fire or structural collapse).

Reacting to disastrous refurbishment projects like Grenfell Tower, the Bill’s clause 125 will (after the BSB becomes law, so not retrospective) extend DPA liability to construction operations on an existing dwelling or building containing dwellings, though only if undertaken in the course of a business. The DLUHC seems to have gone for ‘a quick fix’. It did not consult on the widening the scope of this statutory liability in relation to the standards which it might protect: the integrity of the whole Building Regulations system, perhaps; or a more demanding statutory list, Australia-style, of obligations resting on anyone undertaking residential construction work, as a Parliamentary amendment has proposed. The present proposals also fail to reflect the broader argument that exposing to civil liability all those who play a role in commissioning, building or enabling non-compliant residential construction might appropriately incentivise them towards achieving acceptable build quality.

 

This change also does not dilute the need to identify and target at least one potentially liable solvent or insured defendant (see Part 2). In relation to multi-unit developments, it does not modify any existing lease-based allocation of responsibility for Building Regulations compliance. As the DLUHC factsheet about redress under the BSB points out, the ultimate freehold landlord of a residential tower block is also protected by the DPA. However, none of the few reported cases under the DPA have a landlord as claimant; most instead have been launched by homeowners (some, as in Rendlesham Estates plc v Barr Ltd, in blocks of flats) against developers, consultants or Design & Build main contractors.

The Bill attempts to encourage landlords to explore external finance for making a ‘higher-risk’ building safe (clauses 120, 124 and Schedule 2), including by claiming against third parties. Leaseholders will be able to challenge any increased service charges in the relevant court or tribunal, when the landlord must show ‘reasonable steps’ taken to obtain from others the cost of safety works. According to the Local Government Association, a landlord will still be able – as now – to look first to its leaseholders for cashflow for short-term security measures, then rectification works, even if external funding may eventually benefit unit owners by reimbursing them; again as now, this will push many into personal insolvency or mortgage foreclosure. The lease may even empower the landlord to recover from the leaseholders its costs of defending such a claim, although as Kensquare Ltd v Boakye illustrates, whether it does will depend on the specific lease wording.  A more radical proposal – attempted by an amendment in Parliament – would prevent service charges being used for historic remediation costs at all.

Activating a dormant ‘right of action’: will this help?

The Building Act 1984 (England & Wales) s 38 has the heading ‘Civil liability’. Its subsection (1)(a) creates a free-standing ‘right of action’, independent of any claim under the DPA or for breach of contract or in tort at common law. It provides that ‘breach of a duty imposed by building regulations, so far as it causes damage, is actionable except in so far as the regulations provide otherwise …’. This therefore does not require a relationship imposing a duty of care, and imposes strict liability, not dependent on proof of fault. It is available against any person or body on whom the Act imposes duties (not just powers) – the project site owner and main contractor, as well as whoever operates Building Control. The BSB itself will add many new examples of duties whose breach could lead to liability.

Without clear explanation, the key parts of this section have so far never been brought into force; the original plan was for the BSB to repeal them. The Government plans now to activate them once the Bill is finally adopted, but only for future work. ‘Damage’ is partly defined in s 38(4) as including ‘the death of, or injury to, any person (including any disease and any impairment of a person’s physical or mental condition)’. A court could clearly award damages for the consequences of non-compliant construction: fire damage to a home or its contents, or illness caused by damp. And might do so in the face of any contractual provisions to the contrary. But the DLUHC warns that, unlike under the DPA, claims will not be possible for ‘pure economic loss’ – the cost of rectifying non-compliant features of the building’s construction, or the resulting loss in capital value. If confirmed in court, this will severely limit the value of this additional ground of claim, as will its non-retrospectivity.

 

 

Further protecting homeowners: amending the BSB?

Well-organised attempts are being made to extend protections for building owners in the BSB. One would extend further the liability of those responsible for the creation of defects within housing, borrowing the slogan from environmental law: ‘the polluter pays’; linked is the proposal that service charges simply cannot be used to pay for correcting defective works.

A second encourages (or requires) Government to take the cashflow risk in organising safety-critical rectification on – at least – ‘higher-risk’ dwellings, in return having rights of recourse against developers and others. This is part of the solution adopted in the Australian State of Victoria, whose legal situation is already simpler without leasehold structures for multi-unit developments. There, homeowners and strata title bodies already enjoy significant protection via mandatory ‘transmissible contractual warranties’: valuable rights of action statutorily ‘loaned’ to Cladding Safety Victoria, which has also negotiated adequate PI cover for those doing the work.

If any such amendments survive into the final text of the Bill, or if other changes added augment the liability of those involved in the process of construction, some of my critical points may lose their sting: a positive outcome.

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How to cite this blogpost (Harvard style):

Britton, P. (2021) The Building Safety Bill: better redress for homeowners? Part 1. Available at: https://www.law.ox.ac.uk/housing-after-grenfell/blog/2021/12/building-safety-bill-better-redress-homeowners-part-1 (Accessed: [date])

Found within

Building Safety
Australia
Limitation

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