The difference between patent and latent defects

Defects are aspects of the works that are not in accordance with the contract, those defects can be 'patent' or 'latent':

• Patent defects are those which can be discovered by reasonable inspection.
• Latent defects are those which cannot be discovered by reasonable inspection; for example, problems with foundations which may not become apparent for several years after completion when settlement causes cracking in the building.

When a latent defect becomes apparent, it becomes patent defect rather than latent.

[edit] Patent defects

At any point up until the final certificate has been issued, defects that are discovered by inspection may be reported to the contractor, who should rectify them within a reasonable time, these are patent defects.

Such defects should be rectified before a certificate of practical completion is issued, which can put the contract administrator in a difficult position, where both the contractor and the client are keen to issue the certificate (so that the building can be handed over), yet defects (more than a de minimis) are apparent in the works. Issuing the certificate under these circumstances could render the contract administrator liable for problems that this causes, for example, in the calculation of liquidated damages.

Once practical completion has been certified, the client has taken possession of the works and the defects liability period (or rectification period) begins. During the defects liability period, the client may report any defects that arise to the contract administrator. The contract administrator decides whether they are in fact defects in the works (i.e. works that are not in accordance with the contract), or whether they are actually maintenance issues. If the contract administrator considers that they are defects, then they may issue instructions to the contractor to make good the defects within a reasonable time. Note that it is the contractor's responsibility to identify and rectify defects, not the clients, so if the client does bring defects to the contractor's notice, they should make clear that this is not a comprehensive list of all defects.

At the end of the defects liability period, the contract administrator prepares a schedule of defects, listing those defects that have not yet been rectified, and agrees with the contractor the date by which they will be rectified. The contractor must in any event rectify defects within a reasonable time. When the contract administrator considers that all items on the schedule of defects have been rectified, they issue a certificate of making good defects (or certificate of making good). This has the effect of releasing the remainder of any retention and will result in the issuing of the final certificate. If a defect becomes apparent after the certificate of making good defects has been issued, but before the final certificate has been issued, the contractor may be given the opportunity to rectify the defect anyway, but the final certificate should not be issued until this has been done.

If the contractor, having been given the opportunity to rectify defects, fails to do so within a reasonable time, they may be in breach of contract. In this situation others may be employed to rectify the defects, and the cost of such works deducted from the contractor's retention. In particular circumstances where the cost of rectifying a defect is disproportionate relative to the impact of the defect on the works, the client may agree to have the certificate of making good defects issued anyway, but only on agreement that the contract sum is reduced by an amount that reflects the deduction in the value of the works as a consequence of the defect.

It is important to note that the defects liability period is not a chance to correct problems apparent at practical completion, it is a period during which the contractor may be recalled to rectify defects which appear. If there are defects apparent before practical completion, then these should be rectified before a certificate of practical completion is issued.

If the contract administrator is pressured to certify practical completion even though the works are not complete, they might consider informing the client in writing of the potential problems of doing so, obtaining written consent from the client to certify practical completion and obtaining agreement from the contractor that they will complete the works and rectify any defects. If the contract administrator is not confident about the potential problems that may result from early certification, they might advise the client to seek legal advise.

[edit] 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:

• Defective basement tanking allowing water penetration.
• Inadequate wind-posts or wall ties causing movement damage to walls.
• Under-strength concrete or misplaced reinforcement allowing movement damage to the structure.
• Inadequate foundations causing subsidence of the building.

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 contract or 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.

[edit] Related articles on Designing Buildings

• Certificate of making good defects.
• Completion of construction contracts.
• Defective Premises - Liability and Measure of Damages.
• Defective Premises Act.
• Defects.
• Defects certificate.
• Defects correction period.
• Defects date.
• Defects liability period.
• Defects list.
• Final certificate.
• Flooring defects.
• Latent defects.
• Making good.
• Opening up works for inspection and testing.
• Practical completion.
• Professional consultant's certificate.
• Schedule of defects.

Comments

[edit] To make a comment about this article, click 'Add a comment' above. Separate your comments from any existing comments by inserting a horizontal line.