Defect Claims In Construction Explained

Defects in construction projects are almost inevitable. They’re a significant cause of delays, disputes, and litigation, all of which can incur substantial costs that impact investments and profitability.

Since construction defects are not a new phenomenon, a substantial body of law exists on the subject, along with well-defined legal avenues for redress.

In this article, we examine what constitutes a construction defect and explore the various options available for bringing a claim, as well as the available remedies.

What Is a Construction Defect?

A construction defect is a failure by a contractor to meet the required contractual standard on a development. A defect could be so serious that the contractor is unable to deliver the project to a reasonable level for its intended purpose.

This fault may be associated with the materials used from a supplier, the workmanship, or some aspect of the design.

A defect can be a huge issue affecting multiple parts of a building or complex, or tiny issues, called ‘snagging’ items, which are easy to remedy.

Defects may be readily apparent at an early stage or not show up until years after the completion date.

Construction defects may also be categorised into patent and latent. The distinction is important for determining liability. Patent defects are readily apparent faults; latent defects, on the other hand, are not visible and may not come to light for many years.

Legal Basis for Defect Claims

Some construction contracts define what constitutes a defect, so a breach of contract can provide a basis for a claim.

NEC contracts define a defect as ‘part of the works not in accordance with the works information/scope, or part of the works designed by the contractor which is not in accordance with the law or the accepted design’.

If the contract is silent or unhelpful, then an employer can rely on the common law obligation that a contractor should carry out work to a good standard and in a workmanlike manner. Independent expert evidence is usually required to prove a defect..

Some defects, such as material defects, may rely on contractual provisions as the basis for a claim. However, there is also a statutory obligation that goods and materials will be of sufficient quality, provided by the 1979 Sale of Goods Act and the 1982 Supply of Goods and Services Act.

Common Types of Construction Defect Claims

Common defects include issues of structural integrity, roofing, plumbing, water ingress, and electrical system faults. Construction defects have three classifications:

Workmanship Defects

Not completing a job to the required standard or quality will be set against independent benchmarks. Typically, workmanship defects revolve around a lack of skill.

Most contracts specify a level of workmanship that contractors must adhere to, in line with the contract provisions and any applicable statutory requirements.

Material Defects

Goods and materials that are not of satisfactory quality can cause defects that may form the basis of a legal claim.

Goods and materials are subject to scrutiny against different criteria, including their condition, appearance, and finish, as well as freedom from defects, safety, and fitness for purpose.

Design Defects

Design defects involve pointing the finger at the original architects. However, how far is a contractor implicated in a dispute if there are defects in the design?

Sometimes the contractor has all the design responsibility, some or none. This will depend on how the design responsibility is allocated by the contract.

There is a default obligation on the contractor to comply with the design, selecting materials and processes on the basis that the design is suitable and the materials are fit for purpose, even though they have no input into the original design.

However, there is often an overlap between design defects and workmanship defects, and this is an area for dispute between the parties in its own right.

The difficulty is separating out design defects from installation defects often leads employers to let contracts on a design & build basis. This stops the contractor and the architect from blaming each other, as the contractor will be the single point of contractual liability. Often an employer can work with a designer in the beginning of a project and then assign that designer to the contractor under a design and build contract – achieving the single point of liability for a project.

Who Can Make a Defect Claim?

The project owner or employer can make a defect claim. The legal basis for a claim may be breach of contract, breach of statutory duty, or negligence. The liability period will depend on whether the defect is patent or latent.

Most construction contracts make provision for a defects liability period or rectification period.

The contractor will be required to remedy defects upon practical completion. If they fail to do so, the employer may hire someone else to rectify the defects and consider bringing a claim for defects.

If it’s unreasonable in the circumstances to employ another firm, then it can impact how much the employer may be able to recover in damages from the original contractor.

The Steps Involved in Bringing a Defect Claim

Construction defect claims can follow different routes. The first option is trying to resolve the issue through negotiation and the defects liability period. If problems persist, the DLP has expired, or the parties are disputing practical completion, a claim may become unavoidable.

1. The employer must demonstrate that an area of the work fell below the defined specifications or industry standards and is therefore in breach of what was contractually agreed upon. Early legal advice is crucial in determining whether a valid defect claim exists.
2. The contractor must have been allowed to remedy the defects in line with the construction contract during the defects liability period after practical completion. The rectification period typically ranges from 6 to 12 months, but can be as long as two years. If the contract does not contain such a term, the contractor has a common law right to remedy their own work and, if denied, they can reduce the claim by arguing the employer failed to mitigate their loss.
3. The employer must gather evidence to demonstrate who was at fault; defects can involve multiple parties. Depending on the terms, main contractors can be held liable for the work of subcontractors.
4. Lawyers will determine whether the claim should be made under contract law or through other legal routes. It’s vital to establish at the outset whether there is still legal liability for the claim, and that it is not ‘out of time’. The Building Safety Act 2022 significantly increased time limits in some cases to 30 years.
5. The claimant must gather evidence relating to the defect, which will include site records like inspection and progress reports, completion certificates, snagging lists, export reports, witness statements, and correspondence between the relevant parties.
6. Options for a claim include litigation or Alternative Dispute Resolution (ADR). ADR covers mediation, adjudication, and arbitration. Mediation is a suitable option for parties seeking to preserve a commercial relationship and maintain confidentiality. Adjudication is a statutory right under the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act), although many contracts now provide for it. It’s a fast-track process and usually concludes within 28 days. The contract may outline the process for making a claim, so this should be considered first. Adjudication is a temporary measure, and any decision is immediately binding pending further review via arbitration or litigation, if required. Litigation is often a last resort due to the delay and costs. Cost-to-benefit ratio is also an essential element when choosing which claim route to follow.

Construction Defect Claim Remedies & Compensation

Successful defect claims provide the options of two remedies: specific performance or damages. Most commonly, claimants opt for damages that restore the position they would have been in if the work had been done correctly.

Damages are measured by the reasonable cost of repair or rectification unless this is disproportionate, in which case, the sum awarded is calculated based on the diminution in property value.

Damages can also include any consequential losses that flow from the defect, such as loss of rental income or business disruption. There must be a clear causal link that is supported by evidence.

Specific performance is when the court orders the respondent (contractor) to rectify the defect. However, in many cases, the employer has already done this. An employer has a duty to mitigate their losses caused by the defect.

If the respondent fails to comply with the court order, enforcement proceedings may be necessary.

Frequently Asked Questions

What Types of Losses Can I Recover in a Defect Claim?

In a defect claim, losses are typically based on the cost of repair or rectification. If this isn’t possible, the court may consider other criteria, such as the reduction in property value. A claimant can also recover consequential losses, such as rental income, provided they can demonstrate that these losses flow directly from the defect.

How Long Does a Builder Have to Fix Defects in the UK?

This is typically governed by the construction contract and the Defects Liability Period (DLP), which averages 6-12 months but can potentially extend to two years. Because some (latent) defects don’t come to light for many years, the liability period for defects can continue for a long time. The end of the DLP or rectification period does not end the contractor’s liability to pay for the cost of repairing the defects.

What Is the Time Limit for Bringing a Construction Defect Claim?

The time limit depends on two things: the type of defect (latent defects can take years to reveal themselves), and the legal basis on which the defect claim is made. Contractual liability is subject to a six-year limitation period or 12 years if the contract is executed as a deed; however, liability for defects under different legislation can be significantly longer.

Helix Law Helps Identify Liability, Resolve Disputes, and Protect Investments

When construction defects occur, the picture is invariably complicated. Issues arise regarding what constitutes a defect, who is responsible, and what should be done to rectify the problem.

Defects delay practical completion, incur additional costs, and result in claims. They may also affect the intended use of the building or development, potentially impacting sale proceeds or rental income. There is often reputational fallout as well.

The expert construction team at Helix Law is experienced in all aspects of construction and provides invaluable negotiation and advice from the contract negotiation stage through to completion. We also handle defects and other construction claims. Get in touch today.