Developers Beware

01-Aug-2011

Harrison and others v Shepherd Homes Ltd and others [2011]

In this recent case a developer was found liable to a number of home owners for defective foundations across an entire residential development. In giving judgement a number of issues relevant to developers were considered. These are summarised briefly below:

1. Development obligations in residential sale contracts will now be held to include, whether expressly or implied, a duty to design and construct the works with proper skill and care so as to be fit for purpose.
2. To avoid such duties being implied, a “clear and unequivocal” exclusion clause will be required. A standard “Entire agreement” clause may not suffice.
3. A developer’s construction obligations contained in any sale contract will not merge with the conveyance upon completion of the land transfer. The construction obligations remain separate and continuing.
4. The provisions of the Unfair Terms in Consumer Contracts Regulations 1999 and the Unfair Contract Terms Act 1977 apply to sale contracts, even if the purchasers have sought independent legal advice on the terms of the contract.
5. Liability under the Defective Premises Act 1972 may be open to re-interpretation, which may possibly lead to the widening of the scope of such liability. The case also highlighted the fact that whilst a defect may only cause minor damage, it can still be attributable to a more serious defect that justifies liability under the Act.
6. Notices of defects do not necessarily need to be given in writing.
7. The court set out 11 general principles that should be followed when determining the appropriate measure of damages, including that the default position will be to award the cost or reinstatement provided that it is reasonable to do so.

If you require any further details regarding this case, or the implications of any aspects of the decision set out above, please contact Simon Franklin.

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