4. Construction update
4.1 Building safety
The Building Safety Act 2022 received Royal Assent in April 2022. It impacts on the design and construction of all buildings, and the operation of higher-risk residential buildings. It establishes a new safety regime which will be overseen by a new Building Safety Regulator, and imposes safety-related duties that will apply throughout the whole lifecycle of a building. The key themes of the Act are as follows:
- "Higher risk buildings" are given a higher level of statutory protection. This regime will impact on the design and construction of affected buildings, and safety provisions that related to their occupation. In England, a higher-risk building during design and construction is a building that is at least 18 metres in height or has at least 7 storeys and contains at least two residential units, or is a care home or hospital. In England, a higher-risk building during occupation is a building that is at least 18 metres in height or has at least 7 storeys and contains at least two residential units, and is not a care home, hospital, secure residential institution, hotel, or military accommodation.
- There are mandatory requirements for competence of professionals involved in the building control process. This has resulted in the publication of 3 new Publicly Available Specifications (PAS 8671, PAS 8672 and PAS 8673) to establish core principles, terminology and requirements on competence thresholds for professionals. The Building Safety Regulator has carried out a number of consultations regarding the new standards for building control in England, which it will apply in carrying out its various functions.
- The Act introduces the concept of "the golden thread of information" that dutyholders in relation to higher-risk buildings will be obliged to provide during the design and construction of the building, and which an accountable person will have to keep and maintain while it is occupied. According to the Policy Paper, "Building Regulations Advisory Committee: golden thread report, 21 July 2021", "the golden thread is both the information that allows you to understand a building and the steps needed to keep both the building and people safe, now and in the future". These requirements are not yet in force.
- It provides for the establishment of the New Homes Ombudsman, which provides a free and independent service to consumers who have bought a new home and have concerns about the purchase process or defects that have arisen within the first two years of their ownership.
Enforcement powers take a number of forms:
- The Act provides that failure to comply with a compliance notice or a stop notice is a criminal offence, with a maximum penalty of up to two years in prison and an unlimited fine.
- The Act also extends the limitation periods for claims that relate to a residential unit and are made under the defective Premises Act 1972, section 38 of the Act, or against construction product manufacturers arising from breaches of the Construction Products Regulations. The Act extends the limitation period for claims under the DPA 1972 from six to 15 years prospectively for claims that accrue after the relevant sections of the BSA 2022 came into force, and from six to 30 years retrospectively for claims that accrued before the relevant section of the BSA 2022 came into force.
- The Government has also taken steps to block non-compliant developers from the housing market by, for example, punishing those which do not sign the Building Safety Pledge and then the Developer Remediation Contract (see below).
- It provides for a new Building Safety Levy that will be charged on developers when they apply for planning consent for residential buildings, for the purpose of meeting building safety expenditure. It is not yet in force but the Government held a consultation on its design and implementation which closed in February 2023.
4.2 Fire safety
There have been some recent changes to the fire safety regime. Our briefing in January 2023 focuses on the new Fire Safety (England) Regulations 2022, and there have also been some other amendments to the Regulatory Reform (Fire Safety) Order 2005 via the Fire Safety Act 2021, in particular making it clear that the regime applies to the structure, external walls (including cladding and balconies) and individual flat entrance doors between domestic premises and the common parts of a multi-occupied residential building. The Government's guidance is here.
4.3 Building Safety Pledge
The Government has published the final version of the contract it has been negotiating with developers who have signed its Building Safety Pledge, committing them to remediating unsafe buildings in England with which they are associated. Once the deadline of 13th March 2023 passed, 11 developers were placed on a non-compliance list, the implications of which are that they would not be able to carry out any new developments. Subsequently, at least one of those developers has entered into an amended version of the contract, recognising that their buildings have never had any cladding or fire safety issues.
What does the Developer Remediation Contract say?
The contract follows on from the Pledge that developers were obliged to sign in 2022, and contains the following developer covenants:
- to take responsibility for all the necessary works required in order to remedy life-critical fire safety defects arising from the design and construction of buildings 11 metres and over in height that they developed or refurbished over the last 30 years in England;
- to keep the residents living in affected buildings informed on their progress towards meeting this commitment; and
- to reimburse taxpayers for the funds already laid out by the Government in remediating the affected buildings.
4.4 Collateral warranties
In the case of Abbey Healthcare (Mill Hill) v Simply Construct (UK), the Court of Appeal decided that collateral warranties could, depending on their precise wording, be construed as construction contracts which would mean that adjudication under the Construction Act will apply to disputes under the warranty. This is a useful reminder of the benefit that collateral warranties provide.
Read more about the benefits of collateral warranties for building projects.
4.5 Force majeure
In MUR Shipping BV v RTI Ltd, the Court of Appeal held that a party's reasonable endeavours obligation to overcome a force majeure event required it to accept payment in a different currency to that specified in the contract. Our briefing here considers the case, which has clear application to the construction industry.
4.6 Liquidated damages
In Buckingham Group v Peel L&P Investments the High Court held that the LADs provisions in this contract were enforceable, despite the lack of clarity in the drafting. The decision confirms that the courts will be reluctant to find a provision of a contract void for uncertainty and that its preference shall be to try and find an interpretation that gives effect to the parties' intentions.
4.7 Recovering 'waking watch' costs
In Mulalley & Co. Limited v Martlet Homes Ltd the High Court held that under a construction contract the contractor was liable for both the remediation cost of defective cladding and for the 'waking watch' costs. This is the first High Court judgement on claims concerning fire safety issues following the Grenfell Tower fire in June 2017 and is a key decision for the housing sector which has seen significant costs incurred from 'waking watches' being used as preventative measures until dangerous cladding is removed.
Originally published 10 May 2023
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
