High Court decides on Important Defective Premises Act 1972 case – resulting in full re-build cost liability

Ref. Zennstrom v Moseley & Wilks [2013] EWHC 288 (TCC)

Following on from our consideration of when a home becomes a commercial leisure business in planning terms, we look at when a family home becomes a business venture in the context of the Defective Premises Act 1972.

In the recent case referenced above, Ms Moseley and Ms Wilks found themselves as the Second and Third defendants (of a total of five being sued) in a case brought against them by the purchasers of their £1.1m home. Those purchasers had successfully bought the home in 2009 and by 2012 it was exhibiting such structural defects that it needed, in the opinion of the claimants and their advisors, complete demolition and rebuilding. Through subsequent litigation, the Zennstroms sought to claim damages from the previous owners under the Defective Premises Act 1972.

The grounds for this use of the 1972 Act were that the defendants had demolished and redeveloped their home in 2007, not with a view to creating a home for themselves, but for commercial reasons; to profit by selling it on. The defendants had bought the property for just £360,000 in 2004 and sold the new structure for £1.1m in 2009.

The claimants referred to this section of the DPA 1972:

Section 1(4)(a) Act provides:

“A person who-

(a) in the course of a business which consists of or includes providing or arranging for the provision of dwellings or installations in dwellings; or

(b)…..arranges for another to take on work for or in connection with the provision of a dwelling shall be treated for the purposes of this section as included among the persons who have taken on the work.”

The argument was that the Defendants had acted in the course of business and were thus subject to the obligations in the Act to “see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed.”

By limiting the scope of the Act only to those operating in a commercial context, the intention was to allow purchasers of the property legal recourse to address a seriously, fundamentally structurally deficient property against those who created it. Through the Act, the purchaser can sue the Architect, Builder, Surveyor or Engineer and, in this case, the Architect, Builder and Engineer have all also been sued.

The Court in this case placed the burden of proof on the Claimants. It was for them to put forward a strong case that would both prove beyond the balance of probabilities that the vendors had decided at the time of rebuilding that they were doing so to sell and that they did not intend to occupy the home for anything more than a minimal period after completion, whilst they negotiated the sale.

The Claimants subjected the Defendants themselves to what the Judge called a ‘sustained and forceful cross examination” and attempts were made by the Claimants’ representatives to convince the Court on a number of grounds of the Defendants intentions to build for profit. These included discussions of the Defendants’ financial situation, including difficulties paying a single Architect’s bill, discussion of the defendants’ history of previous property purchases and of their choice of builder – on which point it was suggested that he was chosen only because he provided the lowest quote.

In his conclusions, the Hon. Mr Justice Edwards-Stuart was entirely satisfied as to the honesty of the defendants and was convinced as to their motives in selling the house.

Reasons for this conclusion included:

–  The property was lived in for approaching 15 months after construction was completed, longer than a ‘minimal period’

–  The real reason for sale was because Ms Wilks was changing career (studying to become a hypno-therapist) and they could not afford the mortgage payments on just one salary

–  A number of witnesses attested to their intentions to live in the house

–  The number of individual features were included in the construction that were evidently not to maximise the potential for sale, but to suit the tastes of the incumbents. These included two kitchens, a bespoke bathroom, a bespoke cantilever front door and a top-down projector screen.

The case in this instance therefore went against the Claimants and the full judgement is available here.

Perhaps the most interesting part of the decision, however, was the Hon. Mr Justice Edwards-Stuart proposition that this was a matter of fact and degree to be assessed in each individual instance.

On that basis, it could well be that in another instance where it is established that a homeowner has demolished and rebuilt a house and then sold it on, satisfying the conditions of a minimal time period in occupation and with the evident intention of turning a profit, that homeowner could fall under the auspices of the Defective Premises Act 1972.

Thus, although the defendants were rightly excused in this case, homeowners must beware that, if they choose to redevelop the whole of their house – or potentially even just a subsidiary part – before resale, they may be held responsible for the quality of that redevelopment and, potentially, liable for expensive rebuilding or repair works.

Quality, therefore, is paramount and this case serves to reinforce the need for professional oversight on even small renovation projects and extension works.

www.PropertySurveying.co.uk

01/05/2013                                                                                                            SRJ/LCB

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