The Building Safety Act 2022 – Why all contractors would be well advised to revisit their document retention policies

Since the Building Safety Act 2022 (the ‘BSA 2022’) came into force on 28 June 2022 the construction industry has been getting to grips with the changes it has introduced to the property landscape – particularly the way residential buildings in the UK are constructed and maintained.

The Grenfell Tower tragedy of 2017 was one of the driving forces for the BSA 2022. As well as the push for improved building safety on projects, the legislation sought to ensure that claims arising from defective design and/or construction works dating back several years would not become statute time-barred, leaving property owners without any recourse for potentially extensive and costly remedial works.

As a result, the BSA 2022 extended limitation periods to bring claims for a failure to build a dwelling properly under the Defective Premises Act 1972 (the ‘DPA 1972’). The general rule of the DPA 1972 remains unchanged, that a party seeking to establish liability under the DPA 1972, must demonstrate that:

• those against whom the claim is advanced took on work for or in connection with the provision of one or more dwellings;
• that their work was not conducted in a workmanlike (in the case of workmanship defect issues) or professional (in the case of design defect issues) manner and/or that proper materials have not been used; and
• that as a result of that failure(s), the dwelling in question is unfit for habitation.

The effect on limitation

Prior to the BSA 2022 receiving Royal Assent, the limitation period to bring a claim under section 1 of the DPA 1972 was just 6 years. This has now been extended considerably, having more than doubled.

Section 135 of the BSA 2022 resulted in a new section 4B being added to the Limitation Act 1980, extending limitation periods to bring claims under the DPA 1972:

• For Section 1 of the DPA 1972 (relating to claims connected with a dwelling’s original construction or conversion), to 15 years prospectively and 30 years retrospectively; and
• For Section 2A of the DPA 1972 (relating to claims for works undertaken to an existing dwelling, that work being done in the course of a business), to 15 years prospectively.

For further analysis of the BSA 2022 generally, please see IBB Law’s articles ‘UK Building Safety Act 2022’ and ‘Building Safety Bill – A Review by the Industry’.

Crossover between DPA 1972 claims and Breach of Contract / Tortious Claims

Not every construction dispute will necessarily satisfy the requirements of the DPA 1972. However, for those that do, it is likely that there will also be claims:

• for breach of contract, with limitation periods being 6 years from the date of breach for simple contracts and 12 years from the date of breach for agreements executed as a deed; and/or
• in tort (e.g. in negligence where professional services are being provided), where claims will typically become time barred 6 years from the date that the damage occurs (save for specific exceptions including claims for latent damage).

When, previous to the BSA 2022, claims under section 1 of the DPA 1972 were limited to 6 years, the general similarity of limitation periods meant that it was easier to identify when liability on a project had expired.

The potential impact on contribution claims

With the limitation periods for claims arising under the DPA 1972 now considerably exceeding the limitation periods for claims for breach of contract or negligence, construction industry professionals and contractors will need to keep in mind the impact that this may have on their future liabilities.

The construction industry is well-known for its lengthy contractual chains with projects often involving a number of sub-contracting parties. This can result in claims being pursued down lengthy contractual chains and/or parties brought into a claim by a defendant, sometimes after the original underlying claim has already been resolved by the parties up the contractual chain.

Section 1(1) of the Civil Liability (Contribution) Act 1978 (the ‘CLA 1978’) provides:

“Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)”.

A different limitation period applies to claims for contribution. Limitation runs for 2 years from judgment (or arbitration award), or settlement.

Section 1(3) of the CLA 1978 prevents a contribution claim from being brought in instances where liability has come to an end through the underlying substantive right being extinguished, not where the procedural bar under the Limitation Act 1980 has brought liability to an end.  As such, a defence under the Limitation Act 1980 operates as a procedural bar only – it does not extinguish the underlying substantive cause of action.

When one therefore considers the CLA 1978 in conjunction with the retrospective limitation periods under section 1 of the DPA 1972, a sub-contractor may well find itself exposed to a contribution claim bought in respect of acts which occurred up to 32 years ago. Of course, this is strictly on the proviso that a party seeking to pursue a contribution claim is able to meet the statutory requirements. For example, the main contractor will need to demonstrate the sub-contractor is liable for the same damage.

What is particularly notable is that a main contractor would be able to pursue a sub-contractor for contribution under the CLA 1978 providing that it can demonstrate that the sub-contractor owed a duty to the claimant pursuant to section 1 of the DPA 1972, and that this same duty was breached. It will not matter whether the claimant itself pursued a DPA 1972 claim against the main contractor or the sub-contractor, and it is this side-step of section 1 which is likely to create avenues for contribution claims that may otherwise have previously been considered to have been time barred.

Practical considerations

In light of the DPA’s extended limitation periods, contractors (including sub-contractors) carrying out works to residential developments would be well advised to ensure that they:

• do not destroy any existing records until 30 years from the date of practical completion of those works; and
• maintain sufficient records of each and every project moving forward for a period of at least 15 years following practical completion of the same.

Written contemporaneous records will prove especially invaluable in the event of claims. Whilst a contractor may have individuals who are able to provide a first-hand account of the works by way of witness evidence, if said individual(s) are being asked to recall factual detail of events that happened some years ago (potentially decades), the reliability of evidence is likely to be questioned.

Professionals and contractors are therefore strongly advised to review their document retention policies to ensure that automatic destruction of documentation doesn’t take place any earlier than the timeframes provided for above.

IBB’s specialist Construction and Engineering Solicitors can assist with the complex issues that can potentially arise from questions of limitation when drafting construction contracts and in the resolution of construction disputes.

And as for insurance…

Employers and beneficiaries of collateral warranties will likely require provision to be made in the drafting to provide for an obligation to maintain extended insurance periods to account for the extended liability periods.

But the extended limitation periods may prove difficult to insure. It is likely that insurers will seek to reduce their exposure and, for example, incorporate policy terms to seek to exclude historic claims under their policies (often known as a ‘Retroactive Date Exclusion’).If you find yourselves in a dispute with your insurer in this regard or require advice on the terms of your existing policy, our specialist Insurance Solicitors can assist.

Speak to our specialist Construction and Engineering lawyers

If you have any questions about this blog, please speak to one of our construction team on 03456 381381 or email construction@ibblaw.co.uk.

Alternatively, contact Samantha Beasley on 01895 207283 or Samantha.Beasley@ibblaw.co.uk; or Paul Brampton (Partner) on 01895 207276 or Paul.Brampton@ibblaw.co.uk.