Proposed changes to the Defective Premises Act in the Building Safety Bill – how will liability be extended?

Current status of the BSB

The BSB has now reached Committee Stage in the House of Lords. Further to Michael Gove’s speech on 10 January 2022, a revised draft of the BSB was published incorporating significant changes to the Defective Premises Act 1972 (the DPA) limitation periods, beyond those set out in earlier drafts of the BSB.

Yet further announcements were made by Mr Gove on 14 February 2022, some of which relate to the DPA, as referred to below.

• The current Defective Premises Act provisions
• Changes to the works covered by the DPA
• Changes to the DPA limitation periods
• Other developments
• Will there be many more DPA claims?

The current Defective Premises Act provisions

The duty under the Defective Premises Act 1972

• Currently s1 of the DPA imposes a duty upon “a person taking on work for or in connection with the provision of a dwelling” to “see that the work is done in a workmanlike (or as the case may be) a professional manner, with proper materials, so that...the dwelling is fit for habitation when the work is completed”.
• Where the contractual duty extends beyond reasonable skill and care and creates a “fitness for purpose” type obligation, this is likely to create difficulties for claims under professional indemnity insurance policies, which routinely exclude from cover liability beyond the duty of reasonable skill and care which applies in tortious claims.

Current limitation period for DPA claims

• Liability under s1 of the DPA is currently prospective only and the limitation period runs for 6 years from the date of completion - a claimant must prove that the dwelling was unfit for habitation at the date of completion. That can include defects that were latent at the time of completion, if it can be proved that the property was unfit for habitation at the date of completion.
• The s1 DPA duty also applies to any remedial works carried out to remedy defects in the original construction, so that (for the remedial works) a new, separate limitation period of six years runs from the date of completion of those remedial works.

Who has the DPA duty and to whom is that duty owed?

• The duty under s1 of the DPA is owed by contractors and design professionals involved in the design and construction of the dwelling, as well as developers commissioning a project.
• The duty is owed to the “commissioner” (i.e. the owner of the building or the employer under a construction contract) and to any person who acquires a legal or equitable interest in the “dwelling” and their successors in title. In this regard, the DPA creates a wider scope of duty than traditional contractual or tortious duties and can avoid the “privity trap” which can arise upon the transfer of property by one of the original contracting parties to a third party.

When does the DPA apply - which works are covered?

• The duty currently applies only to the construction of new dwellings, either through construction of new buildings or the conversion of existing buildings into a new “dwelling” and does not include the refurbishment or extension of existing “dwellings”.
• Issues with the common parts of a building which directly impact upon the potential safety of a “dwelling” (such as an apartment within the same building) can in principle also give rise to claims under s1 of the DPA. This could include potentially dangerous external cladding or wall insulation if it could be proven that this prevents the dwelling being “fit for habitation”.

Changes to the works covered by the DPA

The BSB proposes significant changes to the DPA to extend the s1 duty of care (where works are undertaken in the course of a business) to include buildings which are mixed use, containing one or more dwellings. Work to any part of such a building directly impacting upon “dwelling” must not render the dwelling unfit for habitation.

Notably, the new DPA provisions will be extended to cover refurbishment and extension works to existing dwellings in the course of a business – the current DPA provisions only cover new dwellings.

Changes to the DPA limitation periods

As currently drafted (following the changes in January), the BSB will extend the limitation period for claims under the DPA 1972:

• from 6 to 15 years prospectively for claims under s1 and s2A (i.e. for claims that accrue after the BSB takes effect); and
• from 6 to 30 years retrospectively for claims under s1 only (for claims that accrued before the BSB takes effect).

Both the July 2020 and July 2021 iterations of the BSB proposed a 15 year retrospective limitation period for s1 claims, but the latest draft of the BSB has changed that to 30 years.

Where a s1 DPA claim is made retrospectively, the BSB includes two provisos:

• a newly resurrected retrospective claim must be dismissed if a court is satisfied that it is necessary to do so to avoid a breach of a defendant's rights under the Human Rights Act 1998; and
• a claim that has previously been settled or finally determined cannot be revived simply because of the extended limitation period.

Notably, the BSB provides that the limitation period for these retrospective claims will not expire until at least one year after the new limitation period comes into force (the BSB takes effect). This one-year buffer is known as the "initial period". This will protect the position of those potential claimants who are close to the end of the 30-year retrospective limitation period at the time that the BSB comes into effect.

These changes currently remain proposals only but their enactment is beginning to seem likely. On 10 January 2022, Michael Gove stated that the Government has “reset its approach to building safety with a bold new plan to protect leaseholders and make wealthy developers and companies pay to fix the cladding crisis”. The Secretary of State for Levelling Up went on to guarantee “that no leaseholder living in their own flat will have to pay a penny to fix unsafe cladding”.

Other developments

• A second open letter to the “Residential Property Developer Industry” has been sent from the Department for Levelling Up, Housing and Communities requiring commitments by developers by March this year, including the remediation of buildings which they themselves played a role in developing or refurbishing, and providing financial contributions towards a fund which will cover the costs of all other 11-18m buildings with critical life cladding safety defects. Our report on that letter is here.
• Mr Gove has also written to the Construction Products Association asking for financial contributions to fund remediation of unsafe cladding on 11-18 metre buildings and to provide comprehensive information on “all buildings over 11m which have historic fire-safety defects to which these companies have supplied products or services”.
• As mentioned above, on 14 February 2022, further steps were announced by Mr Gove who stated: “It is time to bring this scandal to an end, protect leaseholders and see the industry work together to deliver a solution". Some of the most significant changes will (if enacted) effectively empower the Government to block developers and construction product manufacturers from operating in the market, increase the scope of the building safety levy so it can apply to any residential or mixed-use building (not just higher-risk buildings) and increase the liability (including DPA liability) of those connected to a landlord.

Will there be many more DPA claims?

With the announcement of a retrospective 30 year limitation period, far more buildings will potentially fall within the scope of the DPA (once the BSB takes effect) and it is significant that the parties cannot agree to exclude or restrict the DPA provisions. Contractors and design professionals will no doubt be reviewing their records to identify any projects potentially falling into this category.

A DPA claim may also be attractive to subsequent owners of residential properties who have no contractual rights against the developer and construction professionals and will be then in a position to look back 30 years for potential claims. Where a body corporate has a “relevant liability” (which includes liability under the DPA), the latest proposed amends to the BSB (of 14 February 2022) would additionally give the High Court a power to make a “building liability order” against landlords and associated companies, including a company that has been dissolved and associates of that original company.  

There may be an initial flurry of DPA claims after the BSB takes effect to take advantage of the one-year buffer protecting potential claimants who are close to the end of the 30-year limitation period. However, with the Grenfell tragedy now 4 ¹/₂ years ago, the majority of buildings affected and completed before the commencement of the BSB will already have been assessed. In those cases, limitation, if an issue at all, will have been one of a number of considerations when deciding whether or not to commence proceedings in respect of any defects identified.

One notable defence to newly resurrected DPA claims may be the breach of human rights claim mentioned above (in s119(5) of the BSB) - the first judgment of the Technology and Construction Court (the TCC) addressing this issue will be keenly awaited.

The other caveats to a DPA claim remain relevant – only defects that prevent a dwelling being fit for habitation are covered, which is intentionally restrictive. That said, in the context of building safety and the potential danger, understandably, the approach of the TCC to cladding claims generally, has been framed within the context of the heightened awareness of the risks following on from the tragedy in 2017.