Post-Completion Defects: should you invite the contractor to remedy them?
Property defects often leads to significant additional costs as well as adverse publicity for the companies concerned. An important decision employers often have to make is whether the contractor should be asked – or allowed – to return on site to carry out the necessary repairs.
What does the law say?
Property owners are not necessarily legally required to ask a contractor to repair its own defective work. However, where there is a construction contract in place incorporating a defects liability period (usually 6 or 12 months from the date of practical completion), the contractor will usually have the right to return to the property to rectify defects arising during that period.
Even if they do come back to repair the defects, the contractor could still face a negligence claim and/or a breach of contract claim if further defects arise after the defects liability period has expired (subject to time limits set out in the Limitation Act 1980).
In the absence of a defects liability period, and practical completion has already taken place, the employer can claim damages instead of having the contractor back to put things right – but is this always the best and most cost-effective way?
To have – or not to have – the contractor back?
Employers should note the risks associated with claiming damages instead of inviting the contractor back to repair the defects. Particularly, it may not be possible to claim all your costs of employing someone else to carry out the remedial works.
If employers bring a damages claim, the usual rules about damages apply, ie. there must be causation, remoteness, foreseeability and mitigation of damages. This means employers must take steps to mitigate its losses. They must, therefore, be reasonable in terms of the costs of employing an alternative builder to put things right.
But what if it costs more than the cost of having the original contractor or builder remedy the defects? If the employer does not give the contractor opportunity to put right the defects, it could be treated as having failed to mitigate its damage. In practice, this would mean that any damages award will be limited to the amount it would have cost the original contractor to carry out those works – which would probably be less than the cost of having third party builder in to do the repairs.
This means that for both practical and financial purposes, the most efficient way to have post-completion repairs and defects rectified could well be to ask the original contractor to rectify matters – however unpalatable that might be for the employer. But how do you decide if it is reasonable to get another builder and subsequently claim the costs back from the original contractor?
In exercising reasonableness, certain factors will be relevant including a loss of confidence in the original builder. It may also be reasonable not to invite the contractor back where, for instance, the defects are so serious that no reasonable employer could be expected to have the original contractor back on site, or where the contractor has engaged in fraudulent behaviour or the contractor is unable or unwilling to return. Each case will be fact-specific.
Where the employer can show it has mitigated its losses the appropriate level of damages will include the reasonable costs of the remedial works and of employing someone else to do them.
How can we help?
We advise employers and contractors in the construction industry on their statutory and contractual rights and obligations. For strategic advice on your legal obligations to other contractual parties, contact the expert commercial solicitors at Herrington Carmichael as early as possible.
Please contact Cesare McArdle on 0118 977 4045 and Mark Chapman on 01276 686222.
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.
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