Design teams could be on hook for retrospective leaseholder claims

One of the proposals in the Building Safety Bill is an amendment to the Defective Premises Act 1972 (DPA) which would extend the limitation period from six years post-completion of the building to 15 years.

This change is likely to impact everyone in the industry who has been involved in residential development for the last 15 years – or who will be in the future.

The proposal is for the changes to be implemented two months after the Royal Assent of the bill which is understood to be in May 2022. Therefore the DPA changes will likely occur in July 2022.

The 15-year limitation period will apply prospectively and retrospectively, with the latter taking the limitation period back to summer 1992 from the outset. A claim can be brought under the DPA where the building or the dwellings in it are deemed to be unfit for habitation.

As I understand it, there is no definition of “unfit for habitation” and that will be determined by the judge, using precedent cases as they build up over time. It is likely that the claim will be brought by a leaseholder or, more likely, by a group of leaseholders in a building against the building owner and possibly other parties such as the original contractor and design team.

As the changes are in the Building Safety Bill, it would appear that the intended focus is on fire safety and perhaps structural safety as the reason for the building being deemed unfit for habitation.

It should also be noted that a change to the Building Act is proposed whereby a claim can be brought if physical damage is caused by a breach of the Building Regulations for a period of 15 years after the completion of the buildings. This will only apply prospectively and, like the DPA changes, it will be brought in two months after Royal Assent of the Building Safety Bill.

One consequence of these changes is that we will have to keep project records longer than the typical 12 years. Will we therefore see future appointments and contracts changed to reflect this? It will also mean that many will not have records relating to buildings completed between the 12 and 15 year period.

What should be said at this point is that there are some in the House of Commons who think the 15 year is too short and that it should be 25 years or perhaps more. Such a limitation period would of course mean that the majority of claims between 12 and 25 years would not have historic records to support or allow defence of the claim.

No one knows how the number of claims may increase. I understand that the number has increased since the Grenfell tragedy but the proposed changes may increase them further, especially if the no-win, no-fee legal practices get involved.

The impact on building owners and organisations could therefore be great, even if only in relation to having the resources to respond to potential claim situations. We are likely to see an impact on professional indemnity (PI) insurance cover and costs but we can only anticipate these impacts rather than know exactly what they will be.

It seems to me that the earlier the date of the completion of a building, the harder it will likely be to bring a claim for reasons related to: the lack of records; the lifetime of some building components being less than the period since the building was completed; lack of maintenance; and work being undertaken on the building by others since the completion date.

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While it is of course right that buildings should be safe and built to high-quality standards, it is evident that the proposed changes to the DPA and Building Act will impact us all. What is yet to be seen is how great those impacts will be.