Drafting considerations as a result of the Building Safety Act 2022

The first provisions of the Building Safety Act 2022 ("the Act") came into force on 28 June 2022.

Please see our previous articles for detail on these changes and their possible impact and application - Building Safety Act 2022 – What would strict liability under the Defective Premises Act mean? and Building Safety Act – the first changes are coming into force

Extended limitation periods

One of the key changes made by the Act is to extend the limitation period to 15 years in respect of future claims for dwellings unfit for habitation (section 1 and 2A of the Defective Premises Act 1972) – this covers construction and refurbishment works and applies to all residential properties (it does not matter if it is a high rise or higher risk).

The Act also introduces a new cause of action relating to "construction products" (as described in the Act) and extends the liability period for "construction products" to 15 years from when the works are completed.

Drafting changes to construction contracts?

We have set out below some of the key considerations for a developer/funder and a contractor/consultant when negotiating new contracts for projects in England & Wales where these changes will apply.

Developers and Funders

Consider if the form of contract / appointment needs to be amended to address:

• an express obligation to comply with the Building Regulations / duties under the Defective Premises Act 1972;
• the 15 year limitation period in respect of breach of duties imposed by Section 1 or 2A of the Defective Premises Act 1972 and Works/design not complying with the Building Regulations – this will entitle the developer to pursue the contractor/consultant directly rather than relying on a claim in contribution pursuant to the Civil Liability (Contribution) Act 1978 (which would not guarantee full recovery as liability may be apportioned);
• the "golden thread" of building information – is the records clause sufficient to allow the developer to obtain all necessary information in the event of a claim and is the contractor/consultant obliged to maintain copies of all designs/documents (for up to 15 years);
• professional indemnity insurance – covering claims for the additional limitation period;
• consequential amendments to forms of collateral warranty.

Contractors and Consultants

Consider:

• do you agree to grant the developer the additional rights above or should you resist such amendments (particularly regarding the extension of the 15 year period) so as to not extend your liability beyond the statutory position where the developer could bring a claim against you in contribution;
• do you need to amend subcontracts / sub-consultant appointments to address the above (for the same reasons as the developer might).

There will be further considerations required to address the risks imposed by the new gateway regime. Changes to the planning system, known as ‘planning Gateway one’ have been introduced via secondary legislation and went live on 1 August 2021. We are still to see how gateways two and three will be introduced – Gateway 2 and Gateway 3 are expected to follow in 2023 – watch this space.

Application to Scotland?

The Act has much less impact in Scotland. The only change in relation to prescriptive periods relates to liability for construction products. Claims on new projects will now be able to be made for up to 15 years where a person: (i) fails to comply with construction product regulations in relation to a construction product; (ii) who markets or supplies a construction product makes a misleading statement in relation to it; or (iii) manufactures a construction product that is inherently defect, and that product is used in the construction of a dwelling and that product is the cause or one of the causes of a dwelling unfit for habitation. This is the same test as applies in England & Wales.

It is not yet clear if the above causes of action will apply to a consultant or design and build contractor as the intention appears to have been to address manufacturers and suppliers of construction products. The scope of these provisions is also yet to be tested (in particular who will be considered to "supply" or "market" a product and whether innocent misleading statements will give rise to a cause of action). Developments in this area will be interesting to follow.