Construction Brief: limitation insights July 2022
Section 135 of the Building Safety Act 2022 came into force last month (June 2022), increasing UK limitation periods for claims brought in connection with unsafe buildings. In addition to this recent development here in the UK, we highlight two other articles on the application of limitation from our lawyers in Scotland and Australia.
Limitation and the UK Building Safety Act: new claims and what insurers may have missed
Limitation periods for claims under the Defective Premises Act are now extended for works already completed from six to 30 years, and for work completed in the future from six to 15 years. As a result, claims previously considered statute-barred may now have several additional years in which to be brought. The new landmark legislation will inevitably cause new coverage issues which insurers will need to be alert to.
Contacts: Paul Lowe, Phoebe Penman
Prescription: the only constant is change
The law of prescription (time limits for claims) has recently changed with sections 5 and 13 of the Prescription (Scotland) Act 2018 coming into force last month (June 2022).
Section 5 introduces a new three-part ‘discoverability test’ to determine when the five year prescriptive period begins to run. This new test swings the balance of parties’ interests back towards claimants who will now have more time to investigate claims and issue proceedings. This will inevitably increase the number of claims and defence costs.
Section 13 provides the option of extending the prescriptive period by no more than one year in Scotland. The introduction of such ‘standstill agreements’ may not be compatible with commercial insurance arrangements. Hence, it is prudent for insureds to consult with their insurers before agreeing to any proposed extensions. Likewise, insurers should advise policy holders facing potential claims that agreeing extensions without their consent may have implications for their policy cover and any indemnity ultimately paid out.
Related item: Prescription: the only constant is change
A building action’s limitation period commences from the date the occupancy permit is first used
The Australian Court of Appeal has unanimously allowed a builder’s appeal and confirmed that, under Section 134 of the Building Act 1993, the ten year limitation period for a building action (in respect of defective building work) commences on the date an occupancy permit is first issued.
For large residential and commercial projects, it is not uncommon for works to be completed in separable portions with multiple occupancy permits issued (sometimes issued many months apart). The Court of Appeal decision may therefore result in many building action limitation periods within one project.
Going forwards, owners and contractors alike will need to make an early assessment as to which occupancy permit applies to the particular alleged defects referable to the building action. We also recommend that owners with a potentially expired limitation period engage with the project contractors to ascertain which occupancy permit applies.