Who is liable for latent defects

Social studies. Ben Davis May 2, What are latent defects and are they covered by warranties? What is a latent defect in contract? Does homeowners insurance cover latent defects?

How long is a contractor liable for latent defects? Who is liable for latent defects? Who is responsible for latent defects in construction? How long do latent defects last? What is an example of a latent defect?

How long can you have a latent defect? How do you prove latent defects? How can latent defects be prevented? Is a leak a latent defect? Can you sue for latent defect? What is a latent defect in relation to the law of sale? Is rust a latent defect? Is mold considered a latent defect? Equally, the contractor may have offered to reduce the total price to allow for the costs of not correcting the defect, but this would be on the basis the client agrees to such a solution.

Latent defects are more complicated to resolve as they are not identified during the construction works or during the defect liability period , therefore the building owner is not likely to have a contractual right that obliges the contractor to rectify it. However, there are a number of actions at this point the client can take:.

The time limit that a client can seek redress for breach of contract noted above depends on how the contract agreement was executed i. The applicable law to this is the Limitation Act If a defect has been identified during the construction works, it will need to be corrected before a certificate of practical completion is issued. However, typical circumstances may include the contract administrator being asked to certify completion before all defects are fully closed out.

This might be as the defects are not restricting the client from operating the building or it may be they are considered relatively small in nature. In such circumstances, the contract administrator is best placed to resist issuing a certificate of practical completion until all the works are fully complete and defect free.

If they intend to issue a certificate with works outstanding, then obtaining the clients agreement to do so beforehand is essential. Once practical completion is certified, managing defects under the contract will be through the defect liability period. However, following on from the point above, this should not be considered as an opportunity to correct outstanding defects that were apparent at practical completion. It should be operated such that a contractor can be instructed to return to site and correct new defects that appear during the defect correction period.

This period is typically twelve months long but for certain items of plant installed can be longer i. Once the Contractor has made good the defect the Contractor Administrator issues a certificate of making good. Also, they are to correct defects within the defect correction period as stated in Contract Data Part One, which is usually set to a specified period of within two to four weeks but could be shorter.

In terms of the costs incurred in making good defects, then under most forms of contract the client should be placed into a position as if the works had been carried out correctly. However, once the defects liability period has expired, the client does not have the power to instruct the contractor to return to site and rectify defects that were not notified during the defect liability period and such defects are by default treated as latent defects.

However, in such a circumstance, whilst the new building owner may not have a direct link to pursue the Contractor for pure economic losses, they may, dependent on timing, be able to pursue them to rectify the latent defect. Ensuring that consideration is given by potential new owners as to the contractual protection they have is important here before acquiring property. This is useful if, for example, you are a property developer and the third party wishing to purchase the development can be provided with a collateral warranty, they have a direct link to the contractor in the case of a latent defect arising.

Other such options available are building warranties which are insurance policies for structural damage and defects to roofs, walls and foundations. Dependent on the wording of the individual policy, this could differ, but they are transferrable between building owners.

Also, Latent Defect Insurance, which is a form taken out to provide cover for inherent defects in the design, workmanship or materials that become apparent after practical completion and outside of the defect liability period.

They can be used to offset the cost of repairs or damage due to the defect. Note that latent defect insurance does not cover for pure economic loss or defects to non-structural parts. The architect specified the roof drainage system and subsequently inspected and approved the works had been constructed in accordance with the design.

However, the drainage proved to have insufficient capacity and overflows were missing, which lead to a flood with the building occupier suffering direct losses from damaged stock. This often makes them more dangerous and damaging than the simple defects people easily notice.

Latent defects in construction contracts can get pretty complicated pretty quickly. Patent defects are much easier to manage, with the construction contractor usually being liable for defects which occur during construction and during the defects liability period - which is often around substantial or practical completion.

Patent defects are easily solved through a snagging period or punch list. Parties come together to identify and agree on defects, and then the contractor or subcontractor rectifies all the defects on their list before they are 'finished' and pay is finalised. In contrast, latent defects in construction contracts are far more flexible. Contracts often don't include express references to latent defects, and asset owners and operators can pursue damages when the contractor or builder is deemed or thought to be negligent.

In other scenarios, designers and contractors may be liable for latent defects for between 6 and 12 years. Most of the time, buyers and sellers operate under the reasonable idea of buyer beware.

All parties understand that some defects and deficiencies can only be discovered through destructive testing including demolition, which is often not reasonable. In housing and building construction sales however, the presumption is often placed against the seller, who must prove that they didn't hide or misrepresent the true property to the buyer. One of the main issues with many latent defects and buildings, assets etc.

The dilapidation report can be a handy and invaluable tool for protecting new asset owners and operators from being 'blamed' for a defect which was actually caused during the construction phase and is in fact a latent defect.

In other words, when taking ownership of a new home, building or asset, you should do a dilapidation report in order to capture latent defects. If these defects can be traced back to an issue during the design or construction phase, and the contractor or another party was negligent, then you may be in a good position to claim damages or have the issue fixed. Without a dilapidation report, it's easy for the contractor or responsible party to shift the blame to you, saying that the defect or issue was caused since the new owner has taken possession of the asset.

This can be extremely frustrating and unfair, so taking the right steps to protect yourself is a great way to prepare for latent defects in construction.

As we have discussed, in some ways, latent defects are inevitable and extremely difficult to identify and rectify. But can companies do a better job at avoiding latent defects through better quality management, communication and project delivery? There are many phases of a construction project where latent defects can creep in, including the design phase, project delivery and project handover.