This blog will consider the question of who is entitled to benefit from these obligations and what the consequences are if they are breached.
The Act sets out that, where the conditions A to D (discussed in our previous blog) are met, a party is liable to pay damages to "a person with a relevant interest in relation to the relevant building". In Scotland, a person having such interest is anyone with any right or interest (including a servitude or standard security) in or over the building.
Anyone with a right or interest in a residential building, including its owners or tenants, can make a claim based on these new provisions, whether or not they have any direct connection to the party in breach. Liability will extend to personal injury, damage to property, and economic loss and cannot be excluded or restricted by agreement.
Some of those liable will have no contractual link with the claiming party (for example a homeowner who claims against a manufacturer) and so these sections significantly extend the range of people who can bring such claims.
The extent of the damages payable can include the cost of repair or replacement of the non-compliant product but are, in fact, more wide-ranging than that. Damages payable can also include indirect costs such as the cost of alternative accommodation and other losses.
The Act also introduced the concept of "Cost Contribution Orders". A Cost Contribution Order will, in the fullness of time, be an order requiring the defaulter to pay an amount to a person with an interest in the building which the court considers just and equitable in respect of the costs that the person has reasonably incurred or is likely to incur, in respect of works to make the building or dwelling fit for habitation.
There is much uncertainty as to how a Cost Contribution Order is to operate in practice and the threshold for establishing liability. It will be interesting to see how this issue is dealt with by the Scottish Courts once Cost Contribution Orders are introduced. What is however clear is that Cost Contribution Orders are an alternative to and not a supplement to a party's right to sue for damages and will not allow a double recovery of damages.
Given the various uncertainties of the new Cost Contribution Order regime legal commentators eagerly await the potential introductory regulations to see if they will shed any more light on what is otherwise a relatively opaque concept.
The next blog in this series will look at the introduction of the New Homes Ombudsman and associated scheme.
Should you require assistance with any aspect of a construction contract, we have a large and experienced construction team who would be happy to discuss this with you.
