Building Safety Act 2022 – Scottish perspective

The Building Safety Act 2022, is undoubtedly one of the most assertive reforms to building safety law implementation in the UK. The Act has made significant changes to both the law and practice within the construction industry, with potential implications to a variety of parties as a result.

Passed in June 2022, the Act intends to improve the safety of developments during the construction process; which is welcomed by the insurance industry. However, inevitably, insurance issues are also subsequently created.

Following the Grenfell fire tragedy, the ‘Building a Safer Future’ report - produced as a result of the Dame Judith Hackitt review - lead to the Act. The Act not only impacts ‘higher risk’ buildings over 18m or seven storeys, but also the wider construction industry. The Act proposed an industry-wide culture change as new roles and responsibilities were devised for those: procuring, designing, and constructing high-rise buildings. One main area highlighted was duty holders having to ensure that certain factors are met at each stage (‘gateways’) of the construction process, and to ensure the work complies with building regulations.

This Act is the first phase of scheduled future changes. Following on, more specific regulatory bodies will be set up, resulting in new regulation for the detailed obligations duty holders owe.

Not every provision of the lengthy Act will apply in Scotland, however, two significant parts do:

Rights of homeowners and others.
Extended prescription periods for both pre and post Act projects.

The Act creates new rights of actions against parties who:

Don’t comply with cladding or construction product requirements.
Manufacture an intrinsically defective cladding or construction product.
Provide a misleading statement about a cladding or construction product when either providing or marketing it.

To trigger the new law, a product must have been used in the construction of a residential building and, subsequently, make it ‘unfit for habitation’.

The provisions create a potential liability for anyone involved in manufacturing, marketing, supplying, or installing construction products. Crucially, anyone from owners to tenants with an interest in a residential building can now bring a claim under the new Act. This is irrespective of having a direct contractual connection with the breaching party. Additionally, property is not limited to personal injury or damage claims, but also economic losses - such as alternative accommodation – as a result of the above stipulations. Potentially, a whole new area of perceived exposure by insurers could develop, stemming from parties previously adjudged unable to raise claims. The impact on premiums remains to be seen.

Extended prescription periods

In addition to the above, the new extended prescription period brought in under the Act, applies equally in Scotland.

The Act extends construction product’s limitation period for liability to 15 years, except for buildings using cladding products completed before the Act came into force, whereby a 30 year time limit will now apply. This is a significant deviation from the existing prescription law period in Scotland of five years. Ostensibly, this creates greater exposure for insurers and their policyholders.

An action brought under the new Act as primary legislation, would overwrite any existing contractual agreement in place, regarding limitation periods.

A retrospective clause is also included that possibly permits claims, time-barred before the Act came into force, to now be resurrected under the new law. Professional indemnity insurers (PII) could attempt to restrict their policies covering this extended limitation as a consequence. Additionally, the Act presents issues in defending claims regarding document retention on older projects. Many firms may have failed to archive projects beyond the previous contracted 12 year limitation, believing claims would be time barred. However, with that time bar now essentially removed, it could result in actions being brought against a construction professional with a defence heavily impacted by the loss of such files.
Consequently, we now advise - where possible – retention of documents for: at least 30 years for existing projects, completed prior to the Act (June 2022), and at least 15 years for subsequent projects.

In due course, the increased scrutiny around cladding and construction products will, ultimately, have implications for construction professionals and their insurers. Various professional indemnity insurers approached for comment, on the potential additional exposure the new Act could bring to their policyholders, appear to be ‘in a holding pattern’ at this stage. Inevitably, they will hold an expectation for practices to comply with the new provisions of the Act as best practice and, as such, may make enquiries regarding this. However, any policy condition alternations may be driven by the first test of a live claim scenario.

If you have any questions about the Buildings Safety Act, or would like to know more, please contact your Marsh adviser.

Article

Building Safety Act 2022 – Scottish perspective

Extended prescription periods

Meet the authors

Robert Morris

Andrew Broome

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Building Safety Act 2022 – Scottish perspective

Extended prescription periods

Meet the authors

Robert Morris

Andrew Broome

Related insights

Financial and professional lines claims continue to rise across Europe

Mental health and wellbeing risks in UK financial and professional service

Understanding professional indemnity insurance for accountants in Cyprus

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