Articles, News, Updates
Leaseholder Causes of Action: Key Points for Busy Practitioners
4th July 2023
Hugh Rowan examines three new cases of action under the BSA.
The Building Safety Act 2022 (‘BSA’) has fortified leaseholder’s positions in a number of ways (albeit some are still pending). The three principal new causes of action (plus one old cause, anticipated to come into force soon) are the focus of this article.
1. The Defective Premises Act 1972 (‘DPA’)
The BSA has introduced a new s.2A to the DPA, which came into force on 28 June 2022. This applies to any person (in the course of business) who takes on work in relation to a building containing a dwelling. This person has a duty to ensure that the work is done in a professional manner and the dwelling is fit for habitation when the work is completed. The duty is owed to everyone holding or acquiring an interest in the dwelling (i.e., the freeholders as well occupational and intermediate leaseholders).
The key aspect of this new cause of action to note is that, despite being introduced by the BSA, it is not limited to ‘relevant buildings’ as defined in the BSA but applies to all buildings containing or consisting of dwelling(s).
This acts as a major expansion to the present s.1 of the DPA which provides a similar duty but only in relation to work in connection with the ‘provision’ of a dwelling only.
However, the BSA also expands this old cause of action, by extending the limitation period for claims under s.1 from 6 to 15 years (the same limit applies for claims under s.2A). There is a curious additional limitation to s.1 in that for any cause of action which accrued prior to 28 June 2022, the limitation period is 30 years.
2. Construction and Cladding Product Claims
Broadly speaking, these claims arise where a faulty product is installed during the course of building works, and it renders all or some of the dwellings unfit for habitation. A construction product is something that is incorporated in a permanent manner in construction works. Claims can be brought by lessees or by landlords/building owners against the manufacturer or, if they have made a misleading statement, against the supplier.
In order for liability to arise the construction product or the cladding must fail to comply with regulations, or misleading statements must have been made by the marketer or supplier of the product, or the product must be inherently defective.
It should be noted that there is no definition of “unfit for habitation;” once litigation commences in the area it may be that the definition of “unfit for human habitation” in section 10 of the Landlord and Tenant Act 1985 will be relied upon moving forward.
Damages are payable in relation to personal injury, damage to property or economic loss.
3. S.38 of the Building Act 1984 (‘BA 1984’)
Strictly speaking, this is not a part of the BSA, it is a dormant provision of the BA 1984 which was never brought into force. However, until the 28 of June 2022, it was part of the Government’s transitional plan to bring this old cause of action into force, but it was quietly withdrawn in July 2022.
This section provides that a breach of duty imposed by Building Regulations will attract civil (and not merely criminal) liability. It applies to any building and is not restricted to dwellings only. However, ‘damage’ only includes death or injury (including any disease and any impairment of a person’s physical or mental condition) and does not include economic damage (this was debated with the BSA but ultimately rejected).
For the moment, this cause of action still lies dormant, but it may be activated at any time by the Secretary of State. Notably, when it is activated then the BSA has provided that the limitation period is extended from 6 to 15 years alongside the DPA.
4. Building Liability Orders (‘BLO’)
Problems often arise in relation to practically bringing a claim against limited liability companies. To resolve this and associated problems the BSA has introduced a new Building Liability Order. Where liability is incurred by a body corporate under the DPA or s.38 of the BA 1984, or as a result of a risk to the safety of persons from fire or structural failure, then the High Court can make a BLO, provided it is just and equitable to do so.
If made, a BLO can expand liability to any other ‘associated’ body corporate. For these purposes, two bodies corporate are associated if one controls the other or a third body controls both of them. This allows claimants whose claims would otherwise be thwarted by financially precarious defendants to pursue other corporate bodies within the same family and thus gives them much higher prospects of actual recovery.
Through these four routes, the BSA has strengthened the armoury of not just the leaseholder, but intermediate lessees and even freeholders who have fallen victim to rogue builders, developers, and other contractors. It will no doubt become a fertile area of litigation moving forward and practitioners will do well to follow the early developments in these areas.
This article first appeared in Property Law UK in July 2023.