When an architect certifies that works have been carried out properly, how far does its liability extend?
Most architects would recognise that if they supplied certificates to purchasers of residential units, addressed to those purchasers and confirming the property has been constructed to a satisfactory standard, the recipients should be able to rely on the statements.
However, if the certificates are incorrect, then, depending on the nature of the architect’s liability, there might be a big difference in the time period for bringing a claim, and the amount of damages parties could claim.
This was the situation in the case of Hunt and others v Optima (Cambridge) Ltd. Optima was the developer of a block of residential flats in Peterborough, and had engaged Strutt & Parker as architect to provide ‘sign off’ certificates to purchasers. (Interestingly, Strutt & Parker was engaged as architect, not agent.)
Very shortly after the building was completed, numerous defects arose. Foremost among the defects was a significant deflection and bounciness of the floors, inadequate soundproofing between apartments and water leaks from windows and roofs. Foul drainage beneath the building was also wholly inadequate, leaking foul drainage into the voids under the building.
Each purchaser of the flats received a certificate from S&P confirming that the building had been built to a satisfactory standard and in general compliance with the drawings approved under the Building Regs. As a result, when the residents made claims for these defects, not only was Optima sued, but so was S&P as certifying architect.
A long line of case law makes clear that a professional providing advice to another party with whom it has a special relationship can be liable for so-called ‘negligent misstatement’. The special relationship between S&P and the residents was certainly sufficient to allow claims to be made against S&P.
The judge decided the certificates provided by S&P were individual contracts in their own right. This gave the residents the contractual ability to recover damages
However, the more surprising aspect of the case (even though technically not new law) is that the judge decided the certificates provided by S&P were individual contracts in their own right. This gave the residents the contractual ability to recover damages, which affects the amount of damages recoverable as opposed to damages simply in tort.
The judge’s logic is that the certificates were essentially warranties. However, for the certificates to amount to contractual warranties, some ‘consideration’ (see panel) was needed. Clearly, residents made no payments directly to S&P, but S&P was engaged by Optima, and the residents had all paid the purchase price for the flats to Optima.
The judge held that the purchase price was in part given by residents on the understanding that they would receive a certificate from S&P. This amounted to consideration, and meant there could be a contractual basis for a claim between the residents and S&P.
What does this mean for architects issuing such certificates? Any certificate issued directly from an architect to a buyer of a residential unit is now potentially enforceable directly. For this reason, architects should think of such certificates not simply as a ‘tick box’ exercise, with little ramification if incorrect, but as independently creating a right for the resident to bring a claim against it for defective works.
It goes without saying that if an architect is not sure that the works have been carried out correctly, it should be wary about certifying that they have. If as an architect you agree to provide such certificates, you will need to make allowance in your fee for a higher degree of inspection to ensure you are happy with the quality of the works.
Alistair McGrigor is a partner at Nabarro
Consideration
Generally in English law there is a principle that a promise is not enforceable as a contract unless it is either formalised as a deed, or supported by consideration. Consideration itself is usually deemed to be monetary value, but can equally be an agreement to do, or refrain from, a particular act. The act might benefit the person making it or be of detriment to the person to whom it is made.
In a typical consultant appointment, the architect will promise to perform its services, with consideration being the payment of its fee by the developer. It is for reasons of consideration that many legal documents contain a line stating that one party agrees to pay the other £1, so that something of value (however small) has been paid by the party receiving the benefit of a warranty.
Collateral warranties are often entered into as deeds, which has the added benefit of including a 12 year limitation period.