After a series of back-and-forth between the Commons and House of Lords over various amendments, the Building Safety Act passed its final stage in its Parliamentary journey on 26 April and achieved Royal Assent on 28 April.
Below, we consider what some of these amendments were, what the Government will be doing next to consider some of the issues raised during the Act’s progress through Parliament, and some of the issues insurers may face flowing from the legislation.
Amendments proposed by the Lords in April which were agreed by the Commons included:
- Developers and manufacturers being forced to shoulder the cost of replacing dangerous cladding to protect leaseholders; with leaseholders in medium/high rises protected from “paying a penny” for remediation
- If they refuse to cooperate they could be banned from the housing market
- Leaseholders and landlords will also be able to sue cladding manufacturers if they have sold defective products; this will retrospectively apply back 30 years
When will the changes take effect?
- The introduction of the changes will be staggered, with changes to the limitation period under the DPA introduced by the end of June 2022, and amongst the first changes to take effect
- A plan for the introduction of key changes under the Act can be found here
Changes introduced by the Act include:
- Limitation period under S1 of the DPA (Defective Premises Act) (defects in new builds) extended from 6 to 30 years
- New S2A - duty on those working on a building containing at least a dwelling to ensure the work does not make the dwelling unfit for habitation
- Argument that the liabilities under the DPA may apply to anyone who arranges works
- Proposed Activation of S38 of the Buildings Act 1984 imposes a liability on someone where they breach the Building Regulations and this causes damage (including injury). The limitation period will be 15 years. As this provision has not yet been commenced, it will apply prospectively, to work done after the section comes into force.
Next steps for the Government
During ping pong with the House of Lords, Government made some concessions, including a promise to launch a consultation looking into the issue of how to protect enfranchised leaseholders that are effectively now in the same position as unfranchised leaseholders. Further details are awaited as to what exactly the consultation will encompass and what the timeframe is for its expected launch.
During discussions in the House of Lords, Lord Young of Cookham noted that for some leaseholders “they are effectively leaseholders that have enfranchised as opposed to freeholders”.
Potential impact on insurers
There are a number of changes proposed by the Act and some of these could impact building and liability insurers. In particular:
- The tightening of buildings safety may further increase construction costs (which are already at an all-time high) and impact the cost of repairs carried out by insurers.
- On a more positive note the measures introduced by way of the Act should make buildings safer, and hopefully reduce the number of claims in the future
- The limitation period for bringing a claim under S1 of the DPA (defects in new builds) is extended from six to thirty years under the Act. The change will be retrospective, so previously time barred claims might now be able to be pursued. The limitation period for prospective cases will be increased to fifteen years.
- A new S2A has been inserted in to the DPA which creates a duty on those that do any work on a building which contains at least one dwelling to ensure that the work does not make the dwelling(s) unfit for habitation. The new duty (and the 15 year limitation period for a claim) will only apply to works completed after the Act comes into force.
- There is a potential argument that the liabilities under the DPA will apply to anyone who arranges the works, which could include adjusters or insurers. S125(7) of the DPA provides that a person who, “arranges for another to take on work of that kind is treated for the purposes of this section as included among the persons who have taken on the work”. The counter argument is that for a person to be liable under S1 or S2A they must to the works during the “course of their business” which should give protection to insurers who do not get directly involved in arranging works.
- The Act also activates S38 of the Buildings Act 1984 which imposes a liability on someone where they breach the Building Regulations and this causes damage (including injury). The limitation period for bringing such claims would be fifteen years.
The proposed new S2A of the DPA and the extension to the limitation period for claims under the DPA and Buildings Act warrant consideration by insurers. The new liability under S2A applies to work on any part of a “relevant building” which is defined as “a building consisting of or containing one or more dwellings”. So that could include a commercial property containing one or more dwellings. S1 and S2A will also apply to dwellings, including blocks of flats.
A potential benefit to insurers is that it opens up potential new routes of recovery (under the DPA and Buildings Act), of which one cause of action (S1 of the DPA) will have a retrospective limitation period of thirty years. The potential risk is the argument that where the insurer arranges to rebuild a dwelling or arranges the work to a property containing at least one dwelling, then there is an argument that they could be liable under the DPA for the reasons set out above. However insurers may wish to revisit older cases to reconsider the potential for subrogation claims.
For more information, please contact Matthew Rogers or Natalie Larnder