10th January 2023
Background
This article provides an overview of some of the most significant changes brought in by the Building Safety Act 2022, including the new and expanded causes of action available to homeowners and leaseholders; provisions that enable claimants to pierce the corporate veil; and the controversial expanded and retrospective limitation periods. It also offers guidance as to how existing principles may apply to the new provisions and the likely impact of these widespread changes on the construction and building sector.
1. Following the recommendations of the Independent Review of Building Regulations and Fire Safety, led by Dame Judith Hackitt, and the Building a Safer Future Response, published in April 2020, the government has enacted legislation to address the perceived deficiencies in the regulation of building safety highlighted by Grenfell.
2. The Building Safety Act 2022 (“the BSA 2022”) was granted Royal Assent on 28 April 2022. All sections will be fully enforceable by October 2024. Some parts (such as the limitation provisions) have been enforceable since 28 June 2022.
3. The Act consists of six parts and eleven Schedules addressing various issues relating to building safety and standards. It amends existing legislation including the Building Act 1984 (the “BA 1984”), the Regulatory Reform (Fire Safety Order) 2005, the Defective Premises Act 1972 (the “DPA 1972”), and the Limitation Act 1980 (the “LA 1980”).
4. The BSA 2022 also introduced numerous significant legal developments which are likely to have a significant impact on the liability of all those involved in the construction and management of residential dwellings accountable. The legal developments discussed further below are:
a. New and expanded causes of action under BSA 2022;
b. Provision that enable claimants to pierce the corporate veil; and
c. Expanded and retrospective limitation periods.
New and expanded causes of action
Liability of construction and cladding manufacturers
5. Previously, there was usually no legal relationship between the current owner or resident and the manufacturers of construction materials that comprised that dwelling, which frequently left tenants or current owners with no remedy for defective materials that rendered their home unfit for habitation. This was highlighted as a key issue in Dame Judith Hackett’s Independent Review, which stated that the “principle of risk being owned and managed by those who create it…”, which has been enshrined in UK health and safety law since the 1970s “…should extend to the safety of those who live in and use the ‘products of the construction industry…”
6. Sections 147 to 151 of the BSA 2022 fill this lacuna by creating liability for both “construction products” generally and, “cladding products” (which are defined broadly), where certain conditions are met.
7. The conditions are set out in sections 148 and 149 of the BSA 2022, and are as follows:
a. Condition A: A person either (1) fails to comply with a construction product requirement (both prospective and current), (2) makes a misleading statement in relation to a product in its marketing or supply (a clear reflection of the Grenfell tragedy) or (3) manufactures a product that is inherently defective. As these sections apply to both manufacturers and suppliers, questions as to relative culpability are likely to arise. For example, a supplier may contend that they should not be held responsible for relying on and repeating a misleading statement by a manufacturer. Crucially, however, these provisions do not contain a state of mind element, and a supplier would not be able to escape liability on the basis that there was no intention to mislead.
b. Condition B: The construction product must be installed or applied or attached to, a “relevant building” (i.e. a building consisting of a dwelling or two or more dwellings, according to section 147 of the BSA 2022), in the course of works carried out in the construction of, or otherwise in relation to, the building. By including the words “or otherwise in relation to”, the Government is likely to have intentionally broadened the scope of the provision to encompass refurbishment and renovation works.
c. Condition C: The relevant building, or a dwelling contained in the relevant building, must be “unfit for habitation”. It is presumed that the interpretation of “unfit for habitation” under section 1 of the DPA 1972 will apply, i.e. the building is either 1) not capable of occupation for a reasonable time without risk to the health and safety of the occupants, or 2) not capable of occupation for a reasonable time without undue inconvenience or discomfort to the occupants, (see Rendlesham Estates Plc & Others v Barr Limited [2014] EWHC 3968 (TCC) at [68]).
d. Condition D: The failure identified in Condition A must be the cause or one of the causes of the building or development being unfit for habitation. This condition will prove valuable to prospective claimants, as it offers a more expansive test for causation than traditional “but for” causation. There is a parallel with the recent TCC judgment in Martlet Homes Ltd v Mulalley & Co Ltd [2022] EWHC 1813 (TCC), which found that a claim could succeed, where the defective installation of a cladding system was an “effective cause”, but not necessarily the “but for” cause of their loss. For those interested in considering how defendant manufacturers responding to arguments on causation might frame their position, the written closing submissions made by Kingspan Insulation at Phase 2 of the Grenfell Inquiry are an interesting read. Kingspan relied on a series of BS 8414 tests undertaken post disaster, arguing that these indicated that the type of insulation use was safe to be used in 14 different cladding systems.
8. The liability created cannot be contracted out of: section 148(9) of the BSA 2022.
Remedy for defective refurbishment or renovation work
9. Section 130 of the BSA 2022 inserts a new section 2A into the DPA 1972, addressing a further gap in protection for homeowners and leaseholders where defective work has rendered a dwelling “unfit for habitation”.
10. Whilst section 1 of the DPA 1972 provides a cause of action for defective work connected with the provision of a dwelling, the term “provision” restricted its scope to construction, conversion or enlargement, and excluded work undertaken on existing dwellings. Section 2A broadens the application of the DPA 1972 to include a right to recover for defective refurbishment or rectification works, where the work is done in the course of a business. Notably, however, the new limitation provisions under the BSA 2022, discussed at paragraphs 23-30 below, do not give section 2A of the DPA 1972 retrospective effect. Actions under section 2A of the DPA 1972 (unlike actions under section 1) may therefore only be brought in respect of refurbishment or renovations after 28 June 2022.
11. Section 2A of the DPA 1972 clearly states that this duty applies to work done on the dwelling itself, as well as other parts of the building (such as work on communal areas in a block of flats). Interestingly, although not stated in section 1 of the DPA 1972, the same interpretation has been found to apply to that provision (see Rendlesham Estates plc & others v Barr Limited [2014] EWHC 3968 (TCC)). Section 2A therefore confirms the legislature’s intention for the duties under the DPA 1972 to apply to communal parts.
Compensation for harm caused by breaches of the building regulations
12. Initially, the government’s intention was to bring into force section 38 of the BA 1984, which currently sits unused on the statute books, simultaneously with the new limitation periods under BSA 2022 on 28 June 2022. However, it appears that this step has not been taken, as the provision’s status is still prospective. When in force, section 38 of the BA 1984 will create a cause of action for damage suffered as a result of a breach of the building regulations.
13. The extended limitation period and enforcement powers, such as building liability orders (section 130) created by the BSA 2022 will also apply to this provision, increasing its efficacy.
14. Similar to the DPA 1972 provisions and sections 148 and 149 of the BSA 2022, section 38 of BA 1984 will be welcomed by subsequent owners and leaseholders with no direct contractual nexus to those involved in the construction of their property. Unlike those provisions, however, section 38 applies to all buildings within the scope of the Building Regulations and is not restricted to residential dwellings.
15. Section 38(4) of the BSA 2022 states that “damage” includes the death of, or injury to, any person (including any disease and any impairment of a person’s physical or mental condition). Whilst it remains to be seen how the courts will interpret this provision, the likelihood is “damage” compensated under section 38 will not include pure economic loss (which would be recoverable for actions under the DPA 1972).
Piercing the corporate veil
Building Liability Orders
16. Section 130 of the BSA 2022 gives the High Court power to grant building liability orders (“BLOs”). BLOs create joint and several liability for associated companies (such as parents, successors, or related groups) in relation to liabilities arising under the DPA 1972, section 38 the BSA 1984, or as a result of a building safety risk (as defined under sections 62 and 130(6) of the BSA 2022).
17. Section 130 of the BSA 2022 is likely to be used where the original developer has become insolvent, or where the company involved was a special purpose vehicle without assets. Indeed, section 130(5) confirms that BLOs can be granted in respect of a liability of a body corporate which has already been dissolved, or is dissolved after the making of a BLO, to enable claimants to recover their losses from associated corporate bodies.
18. BLOs will be granted where it is “just and equitable to do so”, and this phrase has been considered in the context of the discretion to order a wind up of a company under section 122(1)(g) of the Insolvency Act 1986. The relevant principles for this analysis are well summarised at [184] to [199] of Re Klimvest plc [2022] EWHC 596 (Ch). Essentially, the court should have regard to the “full factual matrix” of each individual case.
19. Section 132 of the BSA 2022 further supports prospective claimants seeking BLOs, by enabling them to apply for orders requiring specified corporate bodies to share information about their associated companies relating to their corporate structures.
Remediation Contribution Orders
20. Corporate bodies should also be wary of section 124 of the BSA 2022, which empowers the First-tier Tribunal to make “remediation contribution orders” (“RCOs”).
21. Pursuant to section 123 of the BSA, “interested persons”, including those with a legal or equitable interest a building, or any part of it, may apply to the First-tier Tribunal for an RCO which requires the landlord to remedy specified relevant defects under certain conditions.
22. RCOs are designed to rectify the situation where freehold owners of multi-occupied residential buildings use special purpose vehicles to hold their interests. Where the landlord has limited capital, RCOs are intended to pierce the corporate veil by requiring a company “associated” (as defined under section 21 of the BSA 2022) with the freeholder to make payments in connection with the remediation of defects.
Expanded Prospective and Retrospective Limitation Periods
Actions under the DPA 1972
23. One of the most significant changes made by the BSA 2022, is contained in section 135, which inserts a new section 4B into the LA 1980. Section 4B of the LA 1980 extends the limitation periods for claims under section 1 of the DPA 1972 (relating to the “provision” of a dwelling and applying where the dwelling is not “fit for habitation”) in two ways:
a. Pursuant to the LA 1980 section 4B(1) claims in relation to buildings completed after 28 June 2022 (when section 135 of the the BSA 2022 came into force), can be commenced up to 15 years from the date of Practical Completion (rather than the standard six years).
b. More controversially, pursuant to the LA 1980 section 4B(4), claims in relation to buildings completed prior to 28 June 2022 can be commenced up to 30 years from the date of Practical Completion. This retrospective limitation period will impact developers and contractors for older projects that were previously time-barred.
24. Section 135(4) of the BSA 2022 further states that, where a revived limitation period would last for less than one year from 28 June 2022, it will instead last for a full year, affording potential claimants with a grace period to take advice and bring a claim.
25. For example, where a new block of flats is completed in May 2024, and in April 2034, the leaseholders find that the building work was defective to the extent that the flats are now unfit for habitation. Pursuant to section 4B(4) of the LA 1980, the claimants may bring a claim under section 1 of the DPA 1972, within 15 years of practical completion. Alternatively, we could consider a similar claim related to a block of flats completed in July 1992, where the potential action under the DPA 1972 was discovered in 2012, and, as the limitation expired in 1998, no claim was brought. Under the “revived” limitation period, limitation would now expire in July 2022. Applying the one-year grace period, the claimants would have until 28 June 2023 to bring a claim.
26. It is worth recalling that, whilst the cause of action for claims brought under the DPA 1972 is deemed to accrue from the time when the dwelling is completed, where further work is undertaken on the dwelling by the defendant “to rectify the work he has already done”, it will accrue from when that work is finished (see sections 1(5) and 2A(8) of the DPA 1972). Further, for actions brought under section 38 of the BA 1984, when it comes into force, the cause of action may accrue much earlier than practical completion if, for example, the action was for defective design.
27. Further, pursuant to the LA 1980 section 4B(1) and 4B(3), a prospective 15-year limitation period will also apply to claims under section 38 of the BA 1984 and the new provision, section 2A of the DPA 1972.
28. Two safeguards are also introduced to ensure fair application of the new limitation periods:
a. Pursuant to section 135(5), the court must dismiss a claim to which the LA 1980 section 4B(4) applies where its continuation would breach a defendant’s human rights. Defendants to such claims may therefore raise article 6 ECHR arguments. However, it is submitted that such arguments will need to show some further infringement on the Defendants right to a fair trial than the mere passage of time. The ECHR has, in a recent opinion, referred to the importance of limitation periods in protecting against the potential unreliability and incompleteness of evidence likely to be involved in “stale” claims (see Oleksandr Volkov v Ukraine Case No. 21722/11 at [137]). Arguments that are often raised in a response to an application to disapply the limitation period under section 33 of the LA 1980, are therefore likely to also apply to section 4B(4).
b. Where a claim has previously be dismissed or otherwise concluded, on the basis of limitation or otherwise, section 135(6) of the BSA 2022 provides that the extended limitation periods provided for by section 135 will not apply. Claims already settled or dismissed (even in the belief that they were time-barred) cannot therefore be reopened.
Actions relating to construction products
29. Section 150 of the BSA 2022 inserts new section 10B into the LA 1980, which provides a special time limit of 15 years for claims brought under sections 148 and 149 of the BSA 2022. Similarly to section 1 of the DPA 1972, a retrospective 30-year limitation period applies to claims brought under section 149 of the BSA 2022 where the right of action accrued before 28 June 2022, pursuant to the LA 1980, section 10B(2).
30. Section 10(B)3) further includes a one-year grace period for historic claims brought less than a year after the BSA 2022 came into force. Notably, however, section 10B of the LA 1980 does not contain any safeguards to prevent the unfair application of the revived limitation period.
Table summarising the new provisions on limitation periods
| Provision | 15-year Prospective LP | 30-year Retrospective LP | One-year buffer | Potential human rights defence? |
| s. 1 the DPA 1972 | Yes | Yes | Yes | Yes |
| s. 2A the DPA 1972 | Yes | No | No | No |
| s. 38 BA 1984 | Yes | No | No | No |
| ss. 148 and 149 the BSA 2022 | Yes | Yes | Yes | No |
Conclusion
31. The many changes brought in by the BSA 2022 are likely to have a significant and widespread effect on construction and building safety law. Construction professionals and manufacturers involved in the construction of residential owners now face potential liability to the subsequent owners and interest-holders. Contractors and developers will also need to consider the implications and risks of BLOs and RCOs and may no longer be able to hide behind corporate structures. Meanwhile the controversial expanded and retrospective limitation periods are likely to significantly increase the volume of claims, opening the door to historic defects dating as far back as 1992. How the insurers of those now facing claims that were previously time-barred will respond will need to be watched closely.
[1] See Kingspan Insulation Limited “Opening Statement, Phase 2, Module 2” and “Overarching Phase 2 Submissions and Module 7 Addenda” at [29] – [37]
Author: Katy Handley
Editors: Jess Stephens KC, Simon Hale, Helen Dennis
Related practice areas
Would you like to know more?
For help and advice talk to a member of our clerking team. They can advise on the best options for your matter.
Call: +44 (0) 20 7842 5555
