We set out some of the aspects worth considering if facing what appears to be a mountain to climb
In construction, the nature and type of defects can vary significantly, as can the time at which they become apparent. Minor defects can easily be corrected before the building or section is handed over, while significant defects may occur long after the original work has been completed and usually require extensive (and expensive) remedial works to put right.
In the years practised in the expert witness role, defects usually arise because the work was not carried out either in a ‘good and workmanlike manner’, in accordance with good practice or to the manufacturer’s recommendations. Sometimes, inappropriate or defective materials have been used. Such are matters which are typically the responsibility of the building contractor. Alternatively, the designer could be at fault, because a particular design is not working in the manner that it should.
For both the domestic and the frequently used commercial design and build scenario, the contractor would normally have primary liability for failure.
Is it defective work?
Not surprisingly, defects are one of the major causes of dispute and construction claims. Dealing with construction failures requires various degrees of understanding law, building technology and good practice. There is often disagreement when it comes to identifying what a construction defect is. This, of course, will be down to the differing viewpoints and interests of those who are asking the question and/or making the determination. The parties typically include the contractor, sub-contractor, material supplier, product manufacturer, the surveyor or surveyor/architect and of course the employer.
There is no recognised standard definition for a defect, however, it is commonly defined as work which fails to comply with the express descriptions or requirements of the contract, including very importantly, any drawings or specifications, together with any implied terms as to its quality, workmanship, performance or design.
Unless it’s obvious, you may have to undertake the following tests.
Put simply, a defect is something that has a fault or a flaw:
1.Regarding the goods themselves, e.g.
(a)something does not do what it should (that the item does not work)
(b) something that does what it ought to do but is simply not what was asked for (non-compliance with specification) or goods are of a lower standard or quality than requested.
2.In terms of defective workmanship, this would include defective setting out and positioning and defective assembly and non-compliance with accepted, or specified practices and codes
3.For defective design, where there is an element of choice or option in how the works are constructed and what materials are used and the designer fails to use ‘proper skill and care’
The defective work or materials will amount to a breach of contract (if you have one) by the building contractor. There could also be liability to third parties for negligence, and breach of statutory duty.
Patent or Latent Defect?
Before you chose a course of action, it is important to distinguish between ‘patent’ and ‘latent’ defects.
Patent defects are those which you can clearly see during the course of the works.
A latent defect is one which cannot be discovered on an inspection of the works under way, caused by the defective design or construction of a newly constructed, altered or refurbished building. The route to remedy is often enforcement of the contract to your common law rights, as described below.
By their nature, latent defects only become apparent when something subsequently goes wrong with the building, over months or years (such as high winds blowing off parts of the external wall revealing that the necessary wall ties were not used). Other examples may include defective cladding or roofing which leads to water ingress or defective materials being used in structural pillars or beams which degrade dangerously over time.
What are the time constraints for making a claim?
In normal circumstances, if you have a project that was completed under a bone fide building contract, the rectification period (the period to locate and ask the contractor to make good defects found) is 12 months from the date that the works were signed off as completed (know a ‘practical completion’).
If a defect is found after the 12 month rectification period (a ‘latent defect’), and the building contract was signed ‘under hand’, the employer has six years to bring about a claim for damages.
If the contract was made ‘under seal’ (as a deed), usually in the case of companies with two directors executing the document or under company seal) this will double the limitation period to 12 years.
If there is no contract, under the Consumer Rights Act 2015, you technically have six years after the works are completed.
Common defences to claims of defective work
- Not my design
Potentially difficult arguments can arise where work has been carried out incorrectly by the contractor but the surveyor/architect or engineer’s design is also at fault. In these situations, the contractor may deny liability on the basis that even though the work was carried out defectively, it did not cause the damage complained of. In this instance, the contractor and surveyor/surveyor/architect will naturally wish to get to the bottom of exactly who is at fault as they may wish to defend a claim against them or pass blame.
Where the contract does not give the contractor any design liability and the nature of the works is set out in detail in specifications or schedules of work and construction layouts and drawings, then there is at least a strong argument for a builder to say that although the product does not work, he was not at fault since he simply constructed precisely what he had been told to do in accordance with the construction documents provided.
As a general principle, a builder ought not to be liable if he simply builds exactly what he was told to do. However, virtually no contract completely defines the work to be done and in the majority of cases, there is an element of choice to be exercised by the builder over the use of materials and the nature of the work to be done. The contractor may unknowingly be taking on a design liability and the argument “I did exactly what you asked me to do” is not always as cast iron as it appears to be.
With such defences, it is important to note the following passage from the much revered Hudson’s Building and Engineering Contracts, which in the courts is generally regarded as a good test for such defences:
“As a poor generalisation, if plans and specifications are supplied to a builder to work to (especially) if the building owner employs an surveyor/architect or engineer for this purpose, the contractor will not normally have to do more than carry out the work according to the plans and specification in a workmanlike manner and using proper materials, though he may well be fully aware of the purpose for which the work is required and the owner will be unable to complain if the unsuitability of the final result is due solely to exact compliance with that design subject, in cases of very obvious prospective unsuitability, to a duty of the contractor to warn the owner or his architect or engineer’.
- Works aren’t buildable
In light of the above, when a contractor argues that the works were simply not buildable, if a builder undertakes to carry out certain works to achieve a certain result, the fact that that result cannot be achieved often remains his problem.
The builder, by agreeing to undertake the building works, warrants that he will be able to do what he has said he will do. This general principle is, of course, subject to any express contractual terms to the contrary that may exist.
- Works have been accepted
One counter-argument occasionally heard is that the works had been accepted – either by occupation and use of the works or by certification and approval by the surveyor/architect or building owner. This is one that is slightly more complicated to deal with. The position will depend upon the express terms of any contract in place.
Arguments over acceptance become complicated where there is a surveyor/architect or engineer who certifies his approval of the works. As a general rule, a building owner does not accept the contractor’s works by simply taking occupation.
Even if an employer accepts the work so that he becomes liable to pay for it, that does not, in the absence of a term of the contract making acceptance binding on them, prevent them from showing the work is incomplete or badly done and can counterclaim or set off damages in an action by the builder.
The employer can allow judgment to be obtained against the builder and subsequently sue for those damages caused by defects. If sued by the builder, say, for unpaid invoices, the employer could potentially claim that the value of the works has been diminished by the defects and “abate” – i.e. reduce – the contractor’s claim; then subsequently sue the builder for the other damages suffered – such as a loss of opportunity to rent out the premises. Payment of the full price for the work is not a bar to a subsequent action by the building owner for defects.
On the other hand, where there is no independent surveyor/architect or engineer and where the contract expressly says work is to be done to the approval of the building owner and there is no arbitration clause and the building owner gives his approval, the building owner becomes liable for the price of the work and is debarred from complaining of defective work and withholding payment.
Does failure by the surveyor/architect or engineer to require defects to be remedied during the course of the works in itself prevent the owner from claiming damages for defects later? No – the building owner does not waive his right to claim damages and he is not stopped from claiming damages simply because the breaches of contract or defects were visible during the course of the surveyor/architect’s usual visits to site while supervising the work but no disapproval was then expressed.
Typical commercial contractual provisions
The standard forms of construction contract contain provisions dealing with the treatment of defective work during the course of construction, at completion and during the defects liability or rectification period (usually a period of 12 months from the date the work was officially completed).
The most common suite of commercially used contracts, the JCT forms, provide that the employer may issue instructions requiring the opening up for inspection of any work covered up or tests of materials or goods or executed work.
The cost of opening up or testing is added to the contract sum, unless the inspection shows that the materials, goods, or work are not in accordance with the contract – the contractor rightfully then bears those costs.
An issue which often arises in the context of construction projects is whether the contractor has a ‘right to return’ to the site to remedy defects. There is no such right unless one is specifically given to the contractor by the rectification period provisions in the contract.
Where there is no express right for the contractor to return to attend to remedial works, or the relevant period has passed, an employer is entitled to employ others to rectify defects.
The standard forms of building contract use different terminology for the defects rectification period, including ‘defects liability’, ‘maintenance period’ and ‘defects correction period’. The nature and scope of such periods depend on the mechanism adopted in the particular contract, and they are typically seen as applying to the whole of the works or a relevant part. The length of the period will be agreed by the parties and the nature of the works to be undertaken.
In circumstances where defective work is present, several legal remedies may exist. Starting with remedies in contract, where defective work is present as a consequence of a breach of contract, then a claiming party is entitled to be put into the position it would have been if the work had been correctly carried out. This is achieved by a monetary award.
The claiming party’s losses may be assessed on the basis of:
- the reasonable cost of repair of the defect work
- the difference in value or loss of amenity of the relevant work
The general rule is that damage to a building which is attributable to a defect in the structure of that building is not recoverable – such damage is known as ‘pure economic loss’ as the only loss sustained is the fact that the new owner has paid too much for the property.
In 2011 the Court of Appeal clarified that, ordinarily, contractors will not owe duties not to cause pure economic loss. Therefore, they will not owe such duties to subsequent owners.
Turning to the execution phase of the contract, the practical issues tend to focus around evidence and notices. Defects are most likely to be picked up on site if there is regular monitoring and testing.
The surveyor/architect or surveyor has the power in most building contracts to require removal of defective works or to allow the works to remain and where they are allowed to remain to instruct the quantity surveyor to make an appropriate deduction from the contract sum.
It will be a commercial judgement for employers and contractors as to how much they wish to spend monitoring and testing the works. What is crucially important is that if defects are identified that are likely to have implications for the project then comprehensive records will need to be taken.
Similarly, if it is intended to reduce a payment or advance a claim as a result of a defect, then consideration should very rapidly be given to the basis of the claim. It is also not uncommon for issues to arise as to whether an employer waived or agreed to allow a defect to remain. Again, evidence of agreement or waiver should be obtained.
Post completion, if a defect occurs within a defects liability period under a contract then in all probability the employer will be entitled to require the contractor to correct the defect. In some forms this is the case even if it is not clear that the defect is the contractor’s responsibility, although the contractor will be entitled to payment if it is proved the defect is not one for which is it responsible. Clearly, early consideration should be given to the contractual procedures and relevant notices.
Even if the defects liability period has ended the contractor will in the vast majority of cases remain liable in damages.
If you are an end user who did not employ the contractor or design team then you will want to consider whether you have the benefit of any assignment of the relevant building contract or professional appointments, or alternatively whether you have collateral warranties or third party rights.
Measure of damages
In building contracts, the measure of damages (compensation) for defects will normally be the cost of making good and repair. Where this is unreasonable, the lower measure of diminution in value caused by the defect (loss in value of the property) may be allowed.
The measure of damages will also usually include consequential damages such as compensation for loss of use of the building during repairs or liabilities incurred by the employer to third parties including other contractors and sub-contractors.
Although the employer has a duty to mitigate his loss (i.e. keep it as small as possible) that duty does not extend to a requirement to detect breaches.
The general rule that the cost of rebuilding or repair is the appropriate prima facie measure of damages unless it is out of proportion with the injury caused to the employer – i.e. that the employer gets his rebuilding costs unless rebuilding is unreasonable – is what makes the JCT procedure for instructing how to deal with defects so important.
Hopefully the above has given you some idea of the right approach to take when defects arise and nobody wishes to take responsibility.
The above views are expressed by Signature Surveyors. Every claim is different and professional advice should be sought before commencing an action and committing to costs.
Signature Surveyors, RICS Regulated Chartered Building Surveyors