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Liability For Defective Premises: Zennstrom Vs Fagot And Others

RELEVANT TO:

Residential property owners and developers.

SUMMARY:

Pursuant to the Defective Premises Act 1972 (“DPA”) those who refurbish or rebuild residential property with the intention of re-selling owe a duty to a purchaser for defects in the property which make it unfit for habitation. In the case of Zennstrom v Fagot and Others [2013] EWHC 288 (TCC) the Technology and Construction Court has recently considered when a refurbishment or rebuild is carried out in the course of a business thereby making an individual liable under the DPA and when it can be said that the refurbishment or rebuild is for personal use only.

FACTS OF THE CASE

Ms Moseley and Ms Wilks (“the Defendants”) purchased 22 Crowsport, Hamble in Southampton in 2004. The property was on a much coveted private road overlooking a marina. The Defendants said that they purchased the property with the intention of living there. After a while living in the property they had it demolished and they built a new property in its place. Having done so, and due to a change in circumstances, they were unable to continue servicing their mortgage. They therefore had to sell the Property to Mr Zennstrom and another (“the Claimants”).

Following the sale it transpired that there were a number of substantial defects in the new property they had built. The Claimants brought a claim against the Defendants under the Defective Premises Act 1972 (“DPA”). The Claimants stated that the Defendants had built the property purely for profit rendering them liable under the DPA for any defects which made it unfit for habitation.

ANALYSIS

Section 1(1) of the DPA provides that:

A person taking on work for or in connection with the provision of a dwelling (whether the dwelling is provided by the erection or by the conversion or enlargement of a building) owes a duty-

(a) if the dwelling is provided to the order of any person, to that person; and

(b) without prejudice to (a) above, to every person who acquires an interest (whether legal or equitable) in the dwelling;

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.’

The Claimants had to prove that:

1. When the Defendants entered into the contract with the builder to carry out the works they intended to sell the property once the works were completed; and

2. That the Defendants did not intend to occupy the property as their home for any period of time that was more than minimal.

In seeking to prove these elements of their claim, the Claimants relied on previous purchases made by the Defendants; their alleged difficulties in paying for the building works and their financial position before and during the works generally, which suggested that they could never have realistically afforded to live in the property after it was built; and the fact that the Defendants had received a significant inheritance shortly before the sale of the property which had actually put them in a financial position to service the mortgage had they genuinely intended to remain living there.

The Defendants pointed out that they had never carried on a business as property developers; that the installation of unusual features in the property were particular to the Defendants and demonstrated that they were building for themselves and not for the market; their subsequent purchase of a property within 100 yards of the property; and the absence of an NHBC or similar certificate.

Mr Justice Edwards-Stuart found in favour of the Defendants. He stated that he was completely satisfied that when the Defendants embarked on the rebuilding of the property they did not have any intention to sell it. He was also satisfied that the Defendants were not aware of any defects of significance when they sold the property.

This decision was watched closely by those who have rebuilt or refurbished properties for their own use as if it had been found that the Defendants’ had been liable for the defects there would have been a departure from the general rule of caveat emptor – let the buyer beware. The case provides a useful guide to the type of factors that may be taken into account in determining whether the DPA applies.

For more information please speak to Michelle Farmer of Druces LLP’s Litigation & Dispute Resolution team. Please note that this note is for guidance only and reflects the law as at 28 February 2013