As part of its unveiling of some of the detail in the Building Safety Bill currently making its way through Parliament, the government revealed it will extend the limitation period for homeowners to take legal action for ‘shoddy work’.
No doubt this will have been made in a bid to provide some support to leaseholders - amongst other homeowner groups - who are facing great uncertainty at the moment as they wait for the full set of reforms to the leasehold system in the UK to be implemented.
But it actually raises more questions about who should be responsible for righting historic wrongs, and crucially who should pay for them, which is something all investors should be aware of before entering into a property deal.
The announcement comes at a time when leaseholders are also trying to access funds to have the kind of cladding removed from their apartment blocks that contributed to the tragedy of Grenfell Tower, just over four years ago. And we still await news from the Government on when they will move forward on their leasehold reform plans, all of which is contributing to a very challenging time for leaseholders right now.
For investors and landlords, it is a difficult landscape to negotiate as well, with potentially unhappy tenants, many of whom have been impacted by the economic shock of the last 18 months in terms of income.
So, while it is good to see the positive steps the government is taking on this issue by potentially enabling property owners to bring their homes up to scratch, it does feel like they are just scraping the surface.
It is true to say that extending the limitation period from six years to 15 years will be beneficial for some leaseholders, particularly those who feel they are able to challenge the landlord if they have any kind of dispute about who should carry out repairs.
However, it’s not necessarily the case that it would ‘put new cards in the hands of the leaseholder’ as the housing minister Robert Jenrick said when making the initial announcement in July.
When this bill becomes law following its passage through Parliament, what it will do is simply extend the period of limitation to allow homeowners and leaseholders to bring legal challenges. What it doesn’t do is address the more pressing issues of representation and funding.
Legal challenges can be an expensive process even before you get to the issue of paying for the work to be corrected if they lose. Until that is properly addressed in law it will continue to be the major obstacle for most leaseholders who are in need of repair to sub-standard work on their homes.
Funding and representation are at the heart of the issue for leaseholders. The reality of the situation is that if an individual takes on a developer there is a cost to consider as well as the ‘litigation risk’ always involved. No one should go into litigation (client or developer) without a true understanding of the process and the risks involved.
However, legal advice is key and getting the right advice at the outset will make a significant difference to the outcome.
But even then there are some difficult obstacles to negotiate. For example, can the homeowner establish who is responsible in the first place (this is not so easy given the change in building standards and regulations over the years). In addition, an important consideration is what options do they have if the firm has gone bust and disappeared without a trace in the meantime?
Another scenario to consider especially for the potential investor or landlord is that the original developer may have used materials that were lawful at the time, but have subsequently been ruled unsafe. The landlord may well feel in this case that they have acted with all best intentions for their tenant leaseholder, but will this legislation mean they are liable in that case? This is where the law and politics collide.
In my view, there is really no benefit to extending the limitation period without first helping leaseholders fund potential legal actions. That’s the change we want to see, legal protection for leaseholders against any liability for the cost of making their home safe.
But for those who will seek legal action against building firms, it’s imperative that they have expert advice on their side. At CLG we have a specialist property litigation department for that reason. We can advise leaseholders in respect of what options they have and what financial recovery they could benefit from if legal action is pursued before they decide to litigate.
*Jonathan Frankel is a litigation partner of Cavendish Legal Group