School management: Dealing with Building Defects and Capital Projects

A typical building contract will oblige the contractor to carry out the works “in a good and workmanlike manner” using “suitable materials fit for their purpose”. As well as the detail of the works, it is typical also for there to be some detail as to how the works are carried out, for example when the site can be accessed and any matters that might need to be taken into account (e.g. to avoid damage to neighbouring properties or to preserve any special architectural features of existing buildings). This will often be set out in a “method statement”.

A contract may either be just for the carrying out of the works or for both the design and specification of the works and then the carrying out of them, the latter being referred to as a “design and build contract” as opposed to just a build or works contract. This can often be significant as any later problems with either the works themselves or any damage caused to other property by defective works may be a consequence of poor design or poor construction, or indeed both.

A survey is likely to be needed to determine the cause of the apparent defects. The more recent the works the more likely the cause is the design or carrying out of the works, as opposed to later wear and tear or a consequence of later maintenance. Equipment installed as part of the works may also be the subject of a manufactures’ guarantee. Once the cause has been identified, appropriate action can be taken which is likely to involve remediation and/or financial compensation (i.e. damages for breach of contract, being a breach of the condition that the works are carried out in a good and workmanlike manner etc.). In the first instance, it is likely that the school will want to look to the contractor to remedy any defects. That will certainly be the case if the contract is design and build. If the contract does not involve design and it becomes clear that the defects are a result of poor design, then a remedy may need to be sought from the architect or designer. It is not unusual for there to be a dispute as to who may be responsible and mediation or indeed litigation may be necessary to resolve matters and enforce remedies.

This presupposes the contract is with the school (or academy trust) as only parties to the contract can take action under it. Where the contract with the building contractor is with the local authority (or DfE if for example the school is a free school), only the local authority can take legal action. This will be the case unless either the contract extends an express benefit to the school allowing the school to take action under the Contracts (Rights of Third Parties) Act 1999 or a collateral warranty was provided by the contractor to the school enabling the school to pursue a direct remedy for any breach of the contract.

As with any contract, a building contract will either have been signed simply as a contract (sometimes referred to as “under hand”) or as a deed (traditionally this would have been by attaching the company seal and so would have been referred to as “under seal). This is significant as a claim can only be lodged at Court within the period of limitation, which for simple contracts is 6 years from the date of the contract and for contracts executed as a deed is 12 years. The contract should indicate whether it has been executed as a deed or not and if it doesn’t say, it will be a simple contract.

Defects with the works may become apparent quickly or after some time. Defects which emerge over time are usually referred to as “latent defects”, but fundamentally the cause of action is still breach of contract leading to either rectification (specific performance of the duty to carry out and complete the works in a good and workmanlike manner) or more commonly damages (designed to enable the school to employ another contractor to rectify the defects). Most building contracts will specifically provide for steps to be taken if defects are either immediately apparent or appear quickly, typically within the first 12 months after the completion of the works, usually referred to as the “defects liability period”. A “snagging list” is compiled on completion with the view to the building contractor having to carry out the remedial works as soon as reasonably practicable and in any event within the 12 months. A retention from the building contract sum (i.e. the price for the works) will usually be held which will be released to the contractor on completion of the snagging list. If the works are not done, the retention is forfeited as damages. It is then in the school’s discretion whether to employ another contractor to remedy the defects.

To be clear, there is no significance in the nature of the defects, whether they be patent or latent, the contractor is still obliged to remedy or pay damages to compensate the school for the breach of contract. The retention is simply a pre-agreed route to remedy any immediate defects avoiding or at least minimising the risk of dispute and expensive litigation.

A reputable contractor will take the matter seriously once notified of problems and should offer to remedy matters. We would expect them to want to carry out a survey as well to assess for themselves the nature of the problem. If a positive response is not received following the school reaching out, a formal legal letter could be considered, possibly as a prelude to more formal action, either mediation or litigation (though the costs for both can be significant).

Initial practical steps

1. Locate the building contract.
2. Check if any warranties have been provided (or were required to be provided).
3. If the school is not the employer under the building contract, check if any development agreement was entered into, whereby a third party (typically the local authority) has agreed to pursue remedies against the contractor.
4. Check if any contract administrator or architect was employed to supervise the carrying out of the works – what do they recommend/have they been at fault in not adequately managing the contract?
5. Consider carrying out an initial survey to assess the cause and extent of the defect.
6. Consider whether urgent remedial action needs to be taken – but exercise caution as any self help may affect the ability to pursue a remedy against the contractor/architect.
7. Keep a record of any works done.
8. Contact us.

How we can help

We can help advise on the building contract and any warranties and with the drafting of the school’s initial letter to the contractor and/or architect (and then of course the formal legal letter if needed).

Our specialist Construction Department can assist with any legal action to be taken, as well as provide support with any formal mediation. We also have access to expert surveyors who can undertake surveys, with the view to these being used as expert evidence in Court, if need be.