Will construction see 30 years’ worth of retrospective cladding claims?

What do you remember from 1992? The European Union was founded, the Danish men’s football team won the Euros and Bill Clinton became President of the USA… But do you remember what you were doing professionally? If the current amendments to the Building Safety Bill are passed, then construction professionals may need to ask themselves that very question.

The UK government recently confirmed plans to “retrospectively extend the legal right of building owners and leaseholders to demand compensation from their building’s developer for safety defects up to 30 years old”. With cladding issues on the minds of many homeowners, this may well be a key area of focus for claims. 

The amended Bill was introduced to Parliament last July seeking, among other things, to implement the Hackitt review, increase safety in construction and provide greater rights to those living in unsafe properties.

One of the flagship proposals was an increase to the time period within which homeowners, leaseholders and residents in England and Wales could bring proceedings under the Defective Premises Act 1972 (the DPA) to 15 years from completion of works; the government has now decided to double this to 30 years.

Crucially, the Bill’s changes will apply retrospectively, meaning that occupiers of a building completed in 1997, for example, will have until 2027 to raise an action. There is no doubt that the objective – to provide better protections to those who own or live in unsafe properties – is laudable. However, there are practical issues to be considered.

Under the DPA, proceedings can be brought against anyone “taking on work”, or arranging for another to take on work, in relation to dwellings. This means claims can potentially be made against contractors, designers and developers. Historically, the DPA only applied to original construction or conversion, but the Bill has also increased the scope of this duty to cover works on existing buildings carried out in the course of business.

Claimants must show the affected dwelling is “unfit for habitation”, but this term is not defined by the DPA. Previous case law indicates that a property considered unfit for occupation under the building regulations in force at the time would probably be unfit for habitation. However, it is not clear whether someone hoping to rely on the DPA to recover sums in relation to fire safety issues in their homes would be able to point to a breach of the relevant regulations. Until there have been further test cases, uncertainty will therefore remain on what properties are covered.

However, the intent of the change is certainly to give homeowners a route to recover costs. This means that contractors, designers and developers – anyone potentially facing a claim – needs to be aware of the issues that a 30-year retrospective claims period raises. Key points to note are:

Records and recollections – Records from older projects may simply no longer exist. As projects have completed and developers have started new projects, old records will have been filed away. However, these may well have been lost, or even destroyed once sufficient time had passed. In the absence of contemporaneous evidence, there is only so much that people who worked on relevant projects (if indeed they can still be located) will be able to contribute.

Insurance – Contractual obligations to maintain insurance typically expire well before the proposed 30-year period and appropriate coverage may no longer be in place. If an insurance policy has lapsed, the company in question will have a choice of either putting 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 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 tougher.

Future risk – These provisions represent a significant change to the risk profile of any new project. Contractors, designers and developers will need to account for these when funding and pricing works.

Last man standing –The 30-year retrospective period may mean that one or more parties involved in the original project are no longer trading. This leaves those still operating at risk of carrying responsibility alone.

The Bill has been passed by the House of Commons and is now with the House of Lords. If the government timetable is maintained, the Bill will become an Act by this summer and is likely to come into force by 2023.

If no amendments are made by the Lords, construction professionals will need to be aware of the risks these changes present. A good understanding of historic projects, and a review of records held, will assist in defending any actions that might arise.

Eric Johnstone is a senior associate at Brodies LLP, specialising in disputes across the construction, engineering and infrastructure sectors.