Partner at Gateley, Gerard Khoshnaw, a Top 50 national law firm, offers his 10 top tips for SME builders when receiving claims or disputes
- Know your contract
Your plot sale contract is the single most important document between you and your customer. It sets out the rights and obligations of both you and your customer. Consult it when faced with a claim alleging a misrepresentation on sale, defect, boundary issues or change of design or materials.
- Standard of build
This is not a subjective test. Your plot sale contract will set out clearly the level and standard of construction to be reached and it will help you determine whether or not a genuine defect exists.
- Drying out
Hairline cracking can be caused by the customer failing to allow sufficient ventilation to circulate in the home. Often this is not a genuine defect, so you should check the NHBC guidance before responding. If the customer has failed to allow sufficient ventilation to circulate, you may not be liable.
- Maintenance and decoration
Customers are responsible for this from completion, if caused by normal wear and tear. It is seldom the builder’s responsibility.
- Snags are not defects
Snags do occur. It’s important to remember that a snag is not a defect; however, snags must be corrected by the builder within the first two years after completion. It gives the customer no right to compensation.
- Remediation before compensation
Upon detection of a genuine defect, always complete the remedial work before discussing or offering any compensation.
- Courts award small amounts
Genuine claims for damages for distress and inconvenience will not exceed awards of up to £190 per month per owner. The courts try to keep such claims to a minimum and recent Court of Appeal guidance has set compensation levels at this amount.
- Recovery from sub-contractors
If a defect does exist, then often it has actually been caused by a sub-contractor. If compensation has to be paid to the customer, that should be retained from your sub-contractor to meet – either by way of a retention from payments they are owed or by seeking an indemnity from them.
- Second owners
A second owner has no contractual relationship with you. If a genuine defect occurs then they will have to claim against their vendor. The only exception to this may be a claim in negligence; however, claims of negligence are difficult to pursue more than six years after completion.
- Deadlines/limitation on bringing claims
This is the first thing to check upon receipt of a claim. If six years has expired since completion it will be very difficult for the customer to pursue a claim. While they will not be able to pursue a claim in contract, they may be able to pursue a claim in negligence, which will be subject to the fact that ‘economic losses’ are not generally recoverable for any defects in the property. Damage to ‘other’ property or damage to persons may well present a claim. Check this with your lawyers: it is important that all limitation points are taken.
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About Gateley
Gateley is a top 50 full service national law firm which promotes the commercial interests of companies, individuals and organisations. As an experienced lawyer and mediator, partner at the firm, Gerard Khoshnaw, has been recognised in both The Legal 500 and Chambers every year since 1994. He has developed a specialism in the house-building industry, acting on cases for developers ranging from civil regulatory claims to disputes with contractors, agents, local authorities, the NHBC, consultants, professionals and customers.
As well as a number of offices in UK cities such as London, Edinburgh, Manchester and Birmingham, Gateley also have a team based in Dubai.
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