The Murky World of Construction Guarantees, Latent Defects & Contractual Claims
I was prompted to write this blog after a client recently explained to me that her builder recently explained to her that in fact, he had no contractual obligation to correct her work and he was only there to prevent reputational damage. It is fairly common for builders to make statements that their work is only guaranteed for 12 months and perhaps some of them genuinely believe this. Then on the periphery of any guarantees that are given directly by the builder there are all sorts of insurance policies and schemes that may afford the buyer further protection. The ten year NHBC build mark policy or the 25 year SWIGA guarantee for solid wall insulation systems are both examples of policies that are meant to provide the purchaser with additional peace of mind.
The SWIGA guarantee is particularly interesting and borne of the DECC’s requirement for the EWI industry to provide a 25 year guarantee before rolling out solid wall insulation to the mass market as part of Green Deal or ECO works. It is a requirement that ECO work has a 25 year guarantee. So what about homeowners who are privately funding their SWI installations? Surely they are afforded the same level of protection? Well actually no, it turns out that often they are not. A number of companies are delivering privately funded work without the benefit of the 25 year guarantee that is required for ECO funded work. Buyers may get the system suppliers 5 year guarantee on materials but are often told that the installer only guarantees work for 12 months. When it comes to solid wall insulation consumers are quite often confused by the contractual arrangements that exist between themselves, the installer, the supplier, the BBA and any other third party who may be providing the 25 year guarantee. They quite literally do not know who to turn to first when something goes wrong, particularly when they find that their installer is being unresponsive or obstructive in dealing with matters in a reasonable manner. I will focus on one case in particular because the principles could equally apply to any buyer of construction works. The buyer in this particular case bought a very expensive SWI system that failed within weeks of purchase. It was clear that the system had been poorly installed to such an extent that it would not have had BBA approval. They were then shocked to find that they did not have a SWIGA guarantee and the installer was not registered with SWIGA to install this product. Despite this fact, the installer had been heavily recommended by the system supplier. The system supplier rightly pointed out that they have no contractual relationship with the end user and that their relationship lies with the installer and even after admitting that the installation had non-standard components refused to intervene or take action with the installer for not installing a fully approved system, that in all likelihood will not now have BBA approval. If a complaint is made to SWIGA then they would generally direct the designer to carry out an investigation but in this case the installer is playing both poacher and gamekeeper and being very selective about which elements of failure are being investigated. They also refuse to answer a number of written detailed questions that have been put to them by the end user. This can occasionally happen and perhaps potential defendants want to commit as little as possible to written record but I’m sure that the courts would see this as unreasonable behaviour.
You should give your constructor or installer reasonable opportunity to understand the scope and nature of your claim and further opportunity to correct it and again, you may want to seek professional advice with regard to what constitutes a reasonable standard for remediation work. In this particular case, we do not feel that slapping extra base coat and topcoat over an existing silicone top coat in a system that is already exhibiting moisture blisters, is an acceptable or reasonable long term solution. Moreover, we feel sure that this ‘solution’ would not meet with BBA approval.
We are of the opinion that the installation is negligent and only complete removal and re-application of a system from scratch under heavily supervised conditions will solve this problem. In the event that the installer doesn’t agree and refuses to acknowledge the defects then what are the options for this end user? A purchaser who now understandably wants the benefit of a 25 year year guarantee that is rolled out to the mass market.
Firstly, they have to accept that they don’t have a SWIGA guarantee and the lesson learned should be that private clients should insist on a 25 year guarantee before signing up for having solid walled insulation installed. You’ll find that there’ll be no arguments from the installer if business depends on it but I think it is a rather large loophole in the process and damaging to the industry that they would not afford the same level of protection to private buyers of these systems. We can discuss the value of different guarantees but these are expensive systems and I would recommend a 25 year guarantee, if for no other reason than to guard against contractor insolvency.
Secondly, the purchaser has a contract with the installer, if they do not have a written contract then terms are implied. Unless a contract is executed as a deed then it is a simple contract and any claims for breach of contract must be commenced within 6 years of the date from which the cause of action arises. (12 years when the contract has been executed as a deed)
Contractual claims normally relate to latent or patent defects, which generally give rise to claims under breach of contract. However… it is not unusual for buyers to discover latent construction defects many years after time limitations have lapsed and where latent defects are found outside of the 6 year period for breach of contract, then clearly this presents a problem. However if you suffer damage arising from negligence then the cause of action arises when the claimant suffers damage (when the defect appears) rather than when the breach of contract occurred. (Latent Damage Act 1986). The complexity comes from the fact that damage is suffered from the defect occurs, rather than when it is discovered by the client. Thankfully negligence claims are not time barred provided that the buyer instigates proceedings within 3 years of discovering the defect. That may not be as rosy at it initially sounds since all negligence claims must be commenced within 15 years of the contractual breach. Still, I hope that any buyer of construction services realises that the level of contractual protection extends well beyond the 12 month guarantee that many builders say or think they offer, potentially up to fifteen years for tortious claims.
Be warned that contractual rights do not transfer to subsequent building owners and any protection that would have been afforded to the original buyer under contractual terms and conditions will not apply and subsequent loss would be regarded by the courts as pure economic loss.
Whilst I advise all clients to explore all reasonable options to resolve disputes without referral to the courts, very occasionally court action is inevitable. Hope for the best and prepare for the worst is my advice, and with this in mind you should always keep meticulous records of all transactions and communications with your builder. The Civil Courts will always look to see that you have done everything that could reasonably be done to avoid court action and I would always advise that you try to keep legal and professional fee’s proportionate to the value of your claim since even if you are successful then any costs awarded are likely to be proportionate to the value of your claim. You are highly unlikely to recover £10k in costs on a claim also valued at £10k.
You will often need an independent professional report fully detailing the defects and the cause of those defects because the Latent Damage Act requires that you have “the knowledge required for bringing an action for damages in respect of the relevant damage” this means knowledge “of the material facts about the damage in respect of which damages are claimed,” and you are also required to prove “that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence.”
If you have evidence that your EWI system was installed negligently and can prove it, as I believe the client does and can, in this particular case, then in fact they will have potential redress to the civil courts for another 15 years. A sobering thought for any other installer who insists that they have no contractual obligation to correct defective construction works. However, this is currently a fairly straight forward claim for damages under breach of contract and even the six year protection afforded will not be seriously tested since the system has already failed due to a high number of patent and latent defects.
If we are required to intervene on these cases then we work with an excellent construction lawyer who is also a Chartered Quantity Surveyor, so that simplifies and shortens any technical discussions once the site investigation is completed, which can a real benefit in moving the issues forward quickly and cost effectively.
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