Building Safety Act 2022… addressing defects and recouping losses

Stuart Duffy, Associate in the Howard Kennedy Construction and Building Safety team explores the options for developers 

Recouping remediation costs

The Developer Remediation Contract (the "DRC"), which obliges many of the UK's top developers to remediate cladding and other building safety related defects in properties constructed over the last 30 years, has led to an unprecedented remedial scheme across the country. Earlier this year, the Government announced that 4,613 relevant buildings had been identified with unsafe cladding in England and that remedial work had started or completed on 50% of those buildings. This means, whilst works are progressing, there is still a significant number of buildings where remediation has not commenced.    

Key tools 

Although the obligations provided within the DRC may be viewed as onerous, the Building Safety Act 2022 (the "BSA") has created new opportunities for developers to recover remediation costs from parties involved in the construction process. Claimants should be aware of these "tools" when considering what their options for recovering costs are. 

1. Pursuing parties with greater assets

Where potential defendants have been identified (such as consultants and contractors appointed to carry out the original work) but financial due diligence checks demonstrate they do not have the capability to pay any judgment or award made against them, Building Liability Orders ("BLOs") (introduced under the BSA) provide an opportunity to join parent and holding companies with greater assets to the proceedings. Holding companies with numerous subsidiaries are common in the construction industry. Therefore, the ownership structure of the potential defendants and whether a BLO could be sought should be kept in mind by developers when considering their options for recovering remedial costs. 

2. More time to prepare claims 

The amount of time parties have to bring claims under the Defective Premises Act 1972 (the "DPA") was extended under the BSA. Claimants previously had six years following completion of the project to bring a claim, this has now been extended to 30 years for developments completed before 28 June 2022. The test is whether the property is fit for habitation (capable of occupation for a reasonable time without risk to the health or safety of occupants) and all parties contributing to the design and construction of the development could be liable. The extension presents an opportunity for parties to recover losses for buildings constructed as early as the mid-1990s and means any claims previously discarded on the basis that limitation periods had expired should be reconsidered.  

3. A new route to recover from construction product manufacturers 

The use of combustible and flammable products in the external walls of residential buildings is at the heart of the cladding crisis and parties who produce and sell cladding products have been heavily criticised by the Government for their approach to fire safety matters in the past. The BSA provides a new route for parties to claim contributions to remedial costs from product manufacturers, in circumstances where they market or supply products using misleading statements or where they manufacture products which are inherently defective. As such, claims against manufacturers should be considered by claimants when seeking to recover remedial costs.  

Looking forward 

Many developers met Michael Gove's call to action when signing the DRC. Whilst this may have had a significant impact on signatories' profit, the abovementioned tools provide an opportunity to recover these losses from parties who played a role in the design and construction of defective buildings and should be kept in mind as developers move through the process of identifying and remediating buildings.