What is the liability for defects in construction?

Following the completion of construction works, defects can sometimes arise if the quality and durability of the construction is substandard, leading to possible financial and legal consequences. The following blog will help explain the types of defects in construction, and then subsequently determine the liability.

What are defects in construction?

Defects in construction refer to any minor or major failures in the completed works that do not align with the agreed standards, specifications, or regulations outlined in the contract. There are two main categories which will affect how liability is determined:

• Patent Defects – any clearly visible issues such as poor finishings.
• Latent Defects – any hidden issues that may only become apparent over time, such as foundational cracks.

Contractual Liability

The most important basis for liability is the contract itself, which will have outlined the contractor’s obligations in terms of materials, workmanship, and any specifications to comply with. The contract will also specify the procedures for addressing any defects, including the Defects Liability Period (DLP). This is the timeframe during with the contractor is responsible for rectifying any defects, and at no additional costs to the client – if defects are discovered after this period, liability may depend on other provisions instead. The duration of the DLP is defined by the contract but usually lasts between six and twelve months.

Regulatory Liability

The Health, Safety and Environment L153 guidance is the official Approved Code of Practice for the Construction (Design and Management) (CDM) Regulations 2015. It highlights various core legal duties contractors must abide by. This includes that the contractor:

• must plan,
• manage,
• and monitor.

 They work to ensure health and safety risks are controlled.

Contractors must also ensure:

• workers are competent enough to have the right skills, knowledge, and training,
• they must provide site specific inductions to all workers,
• they need to ensure that the client is aware of their CDM duties before starting work.

Failure to comply with these requirements can lead to breach of statutory duty and negligence.

Legal Liability

There are some actions a contractor can be held liable for, and some that do not hold liability. Actions that include liability:

• Poor execution of construction tasks, construction must meet the standards that have been set out by the law.
• Contractors may also be liable if materials that are substandard are provided.
  • liability still might be held even if the materials were provided by a third party.
• If contractors do not fix any defects identified during the relevant period (explained below)
  • costs may be recovered from the contractor. Contractors may not be liable for any design defects they did not complete; this rather lies with the designer or architect.

Liability Period

Statutory liability is a right granted by law and exists regardless of what is written in the contract. The Defects Liability Period (DLP) is often confused with the Statutory Liability period which continues after the DLP has ended, with it being a 6-year period beginning from the date of the breach of contract, negligent act or omission had occurred. Where a contract has been executed as a deed, this can increase to 12 years due to the strict formalities of producing such a document.

The Limitation Act (1980) sets specific statutory liability limitations for simple contracts and deeds. The Latent Damage Act (1986) allows for an extension to the standard six-year statutory limitation period specifically for negligence claims.

The extension applies to the date of discovery or accumulation of the defect, potentially adding a further 3 years. The maximum statutory liability period is 15 years.

Remedies for successful cases of liability:

There are several remedies, and compensation available for when a construction defect caused property damage or financial loss. This can differ for UK property owners and therefore may be subject to different forms of compensation. The type of compensation is dependent on the severity of the defect, the contractual or legal duties breached, and the losses suffered.

• Repair or Rectification Costs – The cost of repairing defective work is the most common form of compensation. This can include replacing defective materials, structural repairs or carrying out remedial work to meet contractual obligations.
• Alternative Accommodation and Related Expenses – If the defect causes the property to be unoccupiable, claimants may be entitled to claim the cost of temporary accommodation, relocation expenses and storage.
• Diminished Value of The Property – Even after repairs some defects can permanently affect the market value of a property. In these cases, compensation may be subject to the difference between the property’s value if the defect had not occurred.
• Legal and Professional Fees – Certain claims may allow the recovery of legal costs, and other expenses accrued while pursuing the defect claim.
• Consequential Losses - Lastly, claims may also include any financial losses that has directly occurred as a result of the defect. These include increased maintenance costs caused by defective construction work or lost rental income.