Building Safety Bill, 05 July 2021: key provisions and how they affect residential developers

After much consultation on the Draft Building Safety Bill, it was surprising to see the introduction of brand new provisions within the proposed Bill, published on 5 July 2021, particularly those affecting limitation periods.

New provisions relating to ‘Remediation and Redress’

The limitation period is the duration in which a person can bring a claim in respect of damages. The Limitation Act 1980 sets out certain restrictions, so that claims brought after a fixed period of time are no longer actionable and the defendant has a complete statutory defence in relation to those accrued causes of action. 

The statutory limitation periods are of course highly relevant to claims brought against various parties since the Grenfell Tower Tragedy (in June 2017) for alleged fire safety defects in external wall systems of residential apartment buildings. Many developments that are the subject of such claims were completed more than 6 years ago, meaning that any claims are now often outside the statutory limitation period of 6 years and claimants are “out of time” to recover damages. 

The limitation rules have put homeowners in conflict with original developers that may rely on limitation defences in response to claims. The Building Safety Bill now published proposes to extend rights for homeowners, so that they have a longer period to bring a claim. This significant proposal poses a number of practical problems for all parties who must manage and respond to claims. 

Amendments relating to service charges in respect of remediation works

It’s clear that the Building Safety Bill is seeking to protect the interests of homeowners as far as possible. A new provision (at section 124) has been inserted in relation to service charges so that landlords cannot automatically recover the cost of remedial work directly from homeowners. Instead, landlords must take “reasonable steps” to obtain monies either from available grants or from pursuing third parties, before pushing remediation costs onto homeowners. This provision means that fire safety/cladding matters are likely to become more litigious going forward, as building owners/landlords are now likely to formally review their legal relationships with original developers and commence claims that have not been notified until now.

Amendments to the Defective Premises Act 1972 and the Limitation Act 1980 

Currently, one potential right of action for purchasers of homes which suffer from defects is to bring claims under s.1 of the Defective Premises Act 1972 (the DPA). This requires a person (including a corporate body) taking on work in connection with a dwelling to undertake the work in a good and workmanlike or professional manner, with proper materials and to make the completed dwelling fit for habitation. The time limit currently for bringing claims for breaches of the duty in s.1 of the DPA is 6 years from the time the dwelling was completed, or from the completion of any further work in respect of the defects. This 6-year time period means that many potential claimants were time barred from making a claim under the DPA because the works in question were completed so long ago. Another potential right of recovery exists with a claim in negligence, which has a potentially longer limitation period, but it is generally not possible for a homeowner to succeed with negligence claims against developers due to legal principles around the recovery of damages for property defects which are considered to be in the nature of “pure economic loss”.

The Building Safety Bill proposes to extend the limitation period for claims under s.1 of the DPA from 6 years from the cause of action to 15 years. It is notable that this affects any claim where a dwelling meets the test under the DPA as being “unfit for habitation” due to defects – i.e. the proposed reforms are not limited to the fire safety/cladding claims that have emerged from the Grenfell tragedy. It is likely that significant fire safety failings will render dwellings “unfit for habitation” as a key plank of this concept concerns being able to occupy the dwelling for a reasonable period of time without significant risk to the health and safety of the occupant. The proposed change in the time limit will have both retrospective and prospective effect, which means that it will affect all ongoing claims and also resurrect those that had previously expired. 

This is obviously a gamechanger for claimants, who in many cases have now been given a right of recovery that they otherwise had lost due to a limitation period expiry under the existing rules.

There are a couple of safeguard provisions proposed in the Bill which are said to be in the interests of fairness, with respect to the s.1 DPA claims. Where a claim has already been dismissed or dealt with, a claimant cannot resurrect an old claim. 

Also, there will be a new provision under the DPA which states that, where an action would have been time barred but for the new 15-year limitation period, and the retrospective nature of that new period would breach a defendant’s rights under the Human Rights Act 1998 (HRA), (which would include, for example, the right to a fair trial), the court must dismiss that claim. In other words, the retrospective application is only applicable to the extent that it does not infringe rights under the HRA. As the rights enjoyed under the HRA are not limited to living individuals but also apply to corporate bodies, this could prove to be a fertile battleground. By way of example, this provision may be relevant where the developer no longer has the information available to it to properly defend its position. We anticipate that this subsection also seeks to deal with live proceedings where a claim under the DPA either hasn’t been brought (because it would have been out of time) or has been brought and defended on the basis of limitation. There is an established line of case law under the ECHR which limits the extent to which new legislation is capable of extinguishing a claim or defence already advanced in proceedings. It is worth noting that the European Court of Human Rights is not part of the European Union’s infrastructure and will remain relevant post-Brexit, as will the Human Rights Act 1998. 

Both of these provisions are yet to be brought into law but will have a 15-year limitation period too. Unlike claims under s.1 of the DPA, which relates to the work in connection with the ‘provision’ (as opposed to refurbishment) of a dwelling, the amendment to s.38 of the Building Act 1984 and new s.2A of the DPA will not have retrospective effect and will not, therefore, attempt to retrospectively impose obligations that did not apply to developments completed in the past. 

Although the changes are broad ranging, they will not be a complete panacea for all homeowners in cladding disputes. There is no automatic compensation and all claims will have to be substantiated. Claims in respect of alleged building defects will often be expensive for claimants to pursue and they are likely to be contested by large companies who are legally represented. There are likely to be various developments now alleged to suffer from fire safety defects where the relevant works were completed longer than 15 years ago and affected claimants will still have no viable causes of action to pursue their claims. There is also no recourse if the developer has since become insolvent. If the developer has insufficient funds to compensate the claimant, the claimant will be left having to carry on with their loss and homeowners may still suffer the ultimate costs of repair via lease service charge provisions.

Next steps

We don’t know as yet when the Building Safety Bill will achieve royal assent and become law. Before then it has a consultation process in the House of Commons and House of Lords, and it is possible that some revisions will be made to the proposed legislation before it comes into effect. The implementation date will also determine for claimants whether they are able to benefit from the 15-year extension, or whether their claims will still be out of time. 

The Bill provides a slight recourse if the claimant has less than 90 days to bring a claim from the implementation, as they will be given 90 days as a fixed minimum period in which to obtain legal advice and prepare their claim.