Monday, 29 May 2023

The Building Safety Act: practical considerations for businesses

The Building Safety Act 2022 (“BSA’’) is a major change to the regulatory regime for the design, procurement, construction, and management of buildings. Therefore, as Ben Smith explains, it significantly increases the risk profile of the companies to whom it applies. The BSA is principally concerned with the safety of buildings and the individuals in them and, therefore, is predominantly, but not exclusively, concerned with residential buildings.

What is the impact of the BSA?

The impact of the BSA can largely be divided into three categories: (1) claims and liability; (2) design, procurement, and construction; and (3) aftercare and facilities management as part of a digital golden thread impacting the whole life management, adaption, and re-purposing of buildings.

(1) Claims and Liability

Several changes to the claims and liability regime came into force on 28 June 2022. The headlines changes are:

A new cause of action in respect of defective cladding products (s.149 of the BSA), which has a retrospective limitation period of 30 years and a prospective limitation period of 15 years.
A new cause of action in respect of defective construction products (s.148 of the BSA), which has a prospective limitation period of 15 years.
Section 1 of the Defective Premises Act 1972, which creates a duty to carry out works to new build dwellings in a professional manner and with proper materials so that the completed works are fit for habitation, now has a retrospective limitation period of 30 years and a prospective limitation period of 15 years.
A new section 2A of the Defective Premises Act 1972 (s.134 of the BSA), which extends the duty in section 1 to all works, including refurbishments, to dwellings. This new section has a prospective limitation period (only) of 15 years.
The introduction of Building Liability Orders which give the courts power, in respect of liabilities arising out of a building safety risk (which include fire safety), to extend liability from the original contracting party to any associated company, even where the original company has been dissolved, and make those associated companies jointly and severally liable.

There will also be a new cause of action for breaches of the Building Regulations in the design and construction of any buildingwhich results in damage including injury to any person under Section 38 of the Building Act 1984. The BSA has introduced a new prospective limitation period of 15 years for claims accruing under Section 38 of the Building Act; however, Section 38 is not yet in force.

Additionally, the BSA (section 161) creates new criminal and civil offences for directors and legal persons for failure to comply with: certain mandatory reporting requirements, cost contribution orders and the new Construction Product Regulations, together with obstruction or impersonation of an authorised officer and providing false or misleading information to the building safety regulator.

Practical points to consider:

Is everyone in the business aware of the new causes of action and potential liabilities under the BSA? If not, does specific training need to be considered?
Is the supply chain aware of the new causes of action and potential liabilities? Is this a risk the business may want to manage to reduce the risk of exposure to claims under the BSA on future projects?
For new projects, consider whether it is possible to agree to contract out of parts of the BSA, or agree reduced limitation periods. Although, note that the BSA specifically provides that any term of an agreement which purports to exclude or restrict, or has the effect of excluding or restricting, any liability arising under sections 148 and 149 of the BSA is void. There does not appear to be any comparable wording in respect of causes of action under the Defective Premises Act 1972, or the Building Act 1984.

(2) Design, procurement, and construction

A new building safety regulator

The BSA introduces a new Building Safety Regulator (‘’BSR’’), which will sit within the Health and Safety Executive and implement a new regulatory regime for ‘’higher-risk buildings’’. It is anticipated that the BSR will be up and running by April 2023.

Higher-risk buildings

The BSA is primarily concerned with the regulation of ‘’higher-risk buildings’’. There are separate definitions of higher-risk buildings in the BSA depending on whether the building is pre / during construction, or post construction. For buildings pre / during construction, Part 3 of the BSA defines higher risk buildings for the purposes of BSR as:

18m or 7 storeys (or higher) and contains two or more residential units; or
is a hospital, or care home.

It is proposed that work on a building which has the effect of making it a HRB, or work on a HRB which has the effect of making it a non-HRB, will also be subject to the new regulations. There has been a government consultation on the proposed Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations which will, hopefully, complete the definition of higher-risk buildings for the new building safety regime.

The golden thread

The term “golden thread” is not used in the BSA; however, in summary, it is taken to mean that, during the design and construction phase, the duty holders, for example, the client, principal designer or principal contractor, must maintain certain documents, which, importantly, demonstrate compliance with building regulations, for example, change logs, design and installation records, product specifications, documents relating to fire safety, floor plans, evacuation plans in the event of fire, etc. The information needs to be kept in an accessible and digital format.

Gateway 2: before work can start

Gateway 2 will replace the building control deposit of plans stage before building work starts for higher-risk buildings. Under the current regime, a decision is given within five weeks (or two months if agreed).

Under Gateway 2, this stage will be a stop / go point and building control approval must be obtained from the BSR before relevant building work can start. The process for an application, review and decision is expected to be arranged by the government. The information released by the government to date suggests that the application:

Is to demonstrate how the proposed building work complies with all applicable building regulations’ requirements;
Includes a comprehensive description of the proposed building work, a detailed plan, and several prescribed documents, including a competence declaration, a design and build approach document, a fire and emergency file, a construction control plan, and a change control plan; and
Must include a description of both their mandatory occurrence reporting arrangements and the golden thread arrangements.

The government has estimated that it will take the industry 41 days to prepare an application and it will then take the new BSR six days to review the application. This seems quite brief, and the government has since stated that it will take 12 weeks (or longer) in total to determine the application. It will be important to consider what happens if this process is delayed: will the contract still function as intended? In such circumstances, who has caused the delay and who takes responsibility for the delay?

It will be possible to apply for a staged approach to building control application. However, this will require careful consideration as to how this will work with the intended approach to the works and the functioning of the contract.

It is also possible that the BSR will approve the application with the imposition of certain requirements. For example, provision of aparticular document by a certain date, only allowing the works to progress to a specified stage, or that notice is given when a specified stage of work has been reached and/or specified work is not covered up for a specified period to allow inspection by the BSR. If this happens, it will be important to consider all the “what if” scenarios and the implications under the contract.

Gateways 2 and 3: during the works

The government has indicated that there will be several requirements executed during the works, perhaps the most significant being:

The BSR can inspect works on HRBs, without notice, and enforce against any breaches of the regulations.
All changes from the original building control application must be recorded in a change control log. Changes will include defined “notifiable changes” and “major changes”:

a. Notifiable changes are changes which could have an impact on compliance in respect of all applicable building regulation requirements and will need to be notified to the BSR. No work can be carried out on the change for two weeks (or longer if agreed) to allow the BSR time to determine whether it needs to take any action.

b. Major changes are changes which could have an impact on compliance in respect of all applicable building regulation requirements to a great extent and will need to be notified to the BSR. No work can be carried out on the change for six weeks (or longer if agreed) to allow the BSR time to determine whether it needs to take any action.
Mandatory reporting to the BSR of any fire or structural safety issues during the works (such a report may trigger an inspection by the BSR as per item 1 above).

Practical points to consider:

Is the supply chain aware of its responsibilities and the risk of an unannounced BSR inspection? Does this need to be factored into the procurement process, site training procedures, etc.?
Who is going to be responsible for mandatory reporting to the BSR?
Change Control:
- How will this be accounted for in the design submission procedure?
- What is the reason for the change? Is it client-driven, for example, value engineering, or contractor driven, for example, a change to the design to overcome unforeseen issues in an existing building?
- Who bears the risk of the change and any associated delays?
- What happens if the change is due to errors in the Gateway 2 approved design?
- Will the design need to be varied to comply with Statutory Requirements (as defined in the contract)?

Gateway 3: handing over the works

The government has indicated that, as part of the completion and handover process, there will be certain requirements that have to be met, and documents to be handed over. Additionally, contractors and designers will have to give declarations of compliance, including:

A completion certificate application must be submitted to the BSR for approval. The application must include plans and documents that reflect the as-built condition of the building, including all plans, documents, and drawings as part of the golden thread of information.
The BSR will assess the application and carry out final inspection(s) of the works. If it is satisfied that the building work complies with all applicable building regulations, the BSR will issue a completion certificate. This BSR has 12 weeks (or longer if agreed) to determine the application. This is the end of the building control process.
The building will need to be separately registered before occupation can commence. This is separate to the building control process.
The completion certificate and the registration of the building both operate as “hard stops” to occupation of the building. It is a criminal offence to allow occupation of a HRB before a completion certificate has been granted.

Practical points to consider:

Is Practical Completion linked to compliance with Gateway 3?
If it is, what is the potential impact on / effect of the Gateway 3 process on: cashflow, release of retention, delays by the BSR, funding (for example, is final drawdown only once Gateway 3 has been achieved?) and the expiry of bonds and start of defect rectification periods?

(3) Post-construction and management of the building

Once occupation commences, it is the “accountable person’s” duty to assess and manage building safety risks for the entire building, not just the part that is occupied. The accountable person is the person with intent to possess the building, or who has a repairing obligation and, therefore, is likely to be the owner / property owner or management company. The accountable person is responsible for:

Applying for the existing building to be registered as an HRB;
Coordinating the golden thread of safety information and keeping it up to date; and
Assessing the building’s safety risks, managing these risks, for example, by providing timely repair works, and producing safety reports.

Failure by the accountable person to comply with their obligations is a criminal offence.

Managing legacy projects / risks

What should you consider when thinking about managing the impact of the BSA on legacy projects:

Consider your current document retention policy and whether it needs to be amended as a result of the new lengthy retrospective limitation periods.
Is any insurance going to be available for claims as a result of the extension to the retrospective and prospective limitation periods? Is it worth having a discussion with your broker?
Do you need to review legacy projects / claims? While reviewing historic claims / projects is unlikely to be an attractive proposition, it may be a good idea if there is a possibility that the business may be exposed to claims under the BSA. At the very least, an audit will inform the business of the scale of the risk and any provision that needs to be made.
It may also be a good idea to audit current active disputes and consider whether the merits would be affected by the BSA and put in place appropriate strategies to deal with this.

Comment

The above is not exhaustive but should provide a good overview of the impact of the BSA.

It is very much a moving target and secondary legislation is, without a doubt, required in order to clarify and bring into force a number of the significant concepts articulated in the BSA.

The BSA will have a huge impact in terms of how a project gets to site, gets built and can be occupied and all parties will really need to understand the ins and outs of the project.

Hopefully, the practical considerations above give food for thought and, importantly, watch this space!

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