Last edited 02 Jul 2021

Latent defects

It is the nature of construction projects that faults and defects caused by failures in design, workmanship or materials, may not become apparent or readily detectable (even with the exercise of reasonable care) until many years after completion of the project, long after the end of the defects liability period. Such defects are known as latent defects (as opposed to patent defects which are apparent).

Examples of common latent defects include:

It is also a feature of construction projects that the completed building will have a life-cycle of many years often with a succession of future owners who had no involvement in the original construction, but who have a liability to maintain the structure.

After the end of the defects liability period the building owner does not have a contractual right to insist that the contractor rectifies defects not notified during that period (as will often be the case with latent defects). The building owner must instead seek redress in an action for damages, for breach of contract, or for negligence. In the case of dwellings there is a statutory remedy provided by the Defective Premises Act 1972.

These rights of action are not perpetual; actions for breach of contract are time barred after 6 years from the date of breach (usually the completion of the building although with a failure of design the breach may occur earlier) see the Limitation Act 1980 Section 5. For a contract under seal, the period is 12 years (see the Limitation Act 1980 Section 8). Clearly therefore it is important to the building owner that all contracts are made under seal; not so for the contractor, the professional consultant or their insurers. Where the claim is for negligence, the time limit is six years from the date on which the cause of action accrued, which will be the date when the damage occurred.

Complex arguments arise in respect of economic loss. This may be many years after the completion of the building. The provisions of the Latent Damage Act 1986 Section 1 (by way of a new Section 14A to the Limitation Act) provides a limitation period for negligence of 3 years from the first knowledge of the cause of action and (by way of a new section 14B to the Limitation Act) an overriding 15 year long-stop from the act of negligence giving rise to the damage. Section 3 of the Act is important as it gives a new cause of action to successive owners.

Commercial fixes for latent defects and successive owners include, collateral warranties, guarantees, building warranty schemes and latent defects insurance. Latent defects insurance first appeared in the UK in the 1980s, imported from Europe and known as decennial insurance. It soon fell out of favour as a result of being over-hyped and overpriced. Latent defect insurance is now making a comeback.

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Is it not time to look at a new model for regulating the construction industry. The need to identify the cause of the defect is essential as only then can the correct response to applied. There is a current model which is used in another industry which could be applied to the construction sector and it would make individuals accountable for their work and ensure a better product reached the market.

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