Commercial Property Update June 2019

Introduction

This month’s update contains an interesting case regarding the liability of a house builder for defective works to a boundary wall, a useful case dealing with Service Charges in commercial Leases and we provide an update on changes to the rules relating to extensions to residential property and an update with regard to the Tenant Fees Act 2019.

Case Law Update

Thomas and A N Other -v- Taylor Wimpey Developments Limited (and others).

This interesting case relates to a boundary wall allegedly built negligently by the First Defendant Taylor Wimpey and explores the options and limitations available to a potential Claimant in bringing a claim against a developer where a significant period of time has elapsed since the original construction of the property.

Background

The claimants were both purchases of houses newly built by Taylor Wimpey around 2007. Both residential properties had the benefit of a 10-year NHBC “Buildmark” Warranty. Proceedings were commenced in January 2018 in relation to retaining walls at the rear of the gardens to both properties. The claimants claimed that these walls had been inadequately constructed and were defective. They claimed that remedial works (in the region of £200,000) were therefore required to correct the defects.

It was accepted that any claims against Taylor Wimpey for breach of contract (in relation to construction obligations entered into in 2006 when contracts were exchanged) were now time barred. Instead, the Claimants asserted that there was instead an action for misrepresentation and/or breach of duty (in tort) and also a right of action pursuant to the NHBC Warranties

Both the claims failed. The court explained why below:

1. The claimants both asserted misrepresentation in tort (rather than in contract). This was done as such an action, if successful, would benefit from an extended limitation period applicable to such claim. The claimant’s argued that Taylor Wimpey had misrepresented that the retaining walls had been properly constructed and were covered by the NHBC Warranties and that this was an actionable misrepresentation on their part. The Court rejected the claim and asserted that the claimants could only rely on a claim based on contractual misrepresentation (which was now time barred).

2. The Court also held that any loss suffered by the owner of a building arising from defective works was limited to the cost of rectifying the defect (a “pure economic loss”) which is ordinarily irrecoverable in tort.

Finally, the Court rejected that a claim could be made under the NHBC Warranties and found that the NHBC were liable only in respect of matters relating to “retaining walls necessary for the structural stability of the house”. The walls in this case were designed to prevent an embankment at the rear of the houses from collapsing and were not therefore integral to the structural design of the houses. The Court held that such walls were not therefore covered by the NHBC Buildmark Warranty.

Summary

The above demonstrates that the costs of remedying a building defect (especially one not integral to the structural integrity of a house) may be difficult to recover from either a builder or from the NHBC under a Buildmark Scheme. It is likely that damages may only be recoverable from a builder in an action for breach of Contract and that any claim in tort is likely to fail on the basis that it is a claim in respect of “pure economic loss”.

The case is also a useful reminder of the applicable limitation periods for breach of contract claims. By virtue of section 5 of the Limitation Act 1980, an action founded on a simple contract cannot be brought after the expiry of 6 years from the date on which the cause of action occurred. Where a builder agrees that future building works to be carried out will be carried out in a good and workmanlike manner, the limitation period will ordinarily run from the date upon which a breach of contract is established. A contractual obligation given by a builder in a purchase contract that works (already completed) have been carried out in a good and workmanlike manner will result in a cause of action accruing on a date the contract is entered into.

Wilcock v The Guinness Partnership Limited

This case provides a useful reminder of the need to include thorough and comprehensive service charge provisions in commercial leases to ensure that costs can be recovered from the Tenant. The case related to costs incurred by a Landlord in clearing waste from a car park at the rear of the Tenant’s building. The costs were added to the service charge bill by the Landlord. The Lease provided that the service charge was “variable” and capable of increase or decrease. The Lease however went on to list those items covered by the Service Charge (garden maintenance, the lighting of stairways and external lighting only). Clearing waste from the car park was not specifically included.

As the service charges was expressed as being “variable”, the First Tier Tribunal held at first instance that the Landlord was entitled to recover additional services (not just those specified in the Lease). This was subsequently over-ruled. On appeal, it was held that there was no provision in the Tenancy agreement allowing the Landlord to add services not expressly set out in the lease. That the service charge was “variable” simply meant that the cost of providing the services agreed to and provided may vary. It did not mean that the range of services to be provided may also vary.

Summary

It is important when drafting a Lease of commercial property to list extensively all services to be provided by the Landlord and recovered via the service charge. In addition, landlords should not assume that the provision of a “sweeper up” clause will allow them to recover for additional services not expressly set out in the lease itself.

In addition, the RICS Professional Statement on Service Charges in Commercial Property recommends that, unless a Lease incorporates very clear wording to the contrary, if a Landlord has in mind provision of a service but has not covered the right to include the cost of providing it in the Service Charge clause, it should not seek to rely on a general “sweep up” clause in the Lease for recovery of the cost.

Permitted Development Regulations

The Town and County Planning (Permitted Development, Advertisement and Compensation Amendments) (England) Regulations 2019 has made permanent an existing temporary right to enlarge a dwelling house by up to 8 meters (in the case of a detached dwelling house) or by 6 meters (in the case of any other dwelling house). Such works had originally been permitted on a time limited basis (expiring on the 30th May 2019) however the amending regulations have removed the time limiting date and the conditions which required the development to be completed by the 30th May 2019. The permitted development is now made permanent.

Residential Tenancies – Tenant Fees Act 2019

The Tenant Fees Act 2019 (“TFA”) came in to force on the 1st June 2019. The TFA prohibits letting fees paid by Tenants in the private rented sector and applies caps on tenancy deposits. The TFA limits tenancy deposits to no more 5 weeks’ rent in the majority of cases (6 weeks’ rent where the annual rent is £50,000 or more) and limits holding deposits to a maximum of 1 weeks rent. These provisions apply to assured shorthold tenancies (other than social housing tenancies and long leases), lettings to students (within the conditions of paragraph 8, Schedule 1 of the Housing Act 1988) and licenses to occupy housing.

If you have any particular questions or queries relating to the above, or any other property matters then please do not hesitate to contact our Chris Porter at cporter@fionabruce.co.uk or by telephone on 01925 263 273.