08 May Basement defects
During contractual negotiations between a purchaser and developer, there is constant toing and froing between the party building and the party buying which involves each party seeking to shift away as far as possible from any form of liability or responsibility. This legal aspect of liability appears to be, and of course justly is, at the fore front of both parties’ minds; but more so the party purchasing as they would wish to have an added benefit and assurance, apart from NHBC, that the property they have purchased is dependable and secure. In most instances the buyer will have the higher negotiating position. The case of Harrison and others v Shepherd Homes Ltd and others  EWHC 1811 (TCC) (“Harrison”) tilted the balance slightly in favour of the purchaser. There is now a growing trend, however, in the luxury building and high-end properties (“HEP’s”) market that, if continued unchecked, could potentially create a bigger problem for purchasers than liability. This problem is basements.
Basements, a traditionally American concept, are now heavily on the increase as competition for space intensifies in the UK and in particular, London. The idea of having not just extra space (rear extension) or room (loft or garage conversation) but rather an extra floor (or more) has become attractive to buyers and developers alike. The rise in basements, in areas with higher concentration of HPE’s is staggering: The Royal Borough of Kensington & Chelsea alone in the past four years granted applications for 800 basement extensions, refusing 90 with a further 20 outstanding. The reason for this is simple: if one cannot build upwards, the only other solution for expansion is downwards.
“whoever owns the soil, it is theirs all the way up to Heaven”
In some instances, the above solution has been taken rather ironically to new heights – including a property in Knightsbridge for former TV Mogul David Graham – where plans were made for a four storey basement beneath a 19th Century School house. This would mean this property would be deeper below than its neighbours are above ground. Planning permission in the UK is amongst the most strict in the world. This has obviously affected one of the most cherished elements of property law, enshrined in the common law with Accursius’ famous statement: Cuius est solum, eius est usque ad coelum meaning “whoever owns the soil, it is theirs all the way up to Heaven”. Those with a keener eye will point out that the sentence, as commonly quoted above, is in fact incomplete. The remainder of the statement explains best what has faced those seeking to go not just above, but also below the soil: et ad inferos – “and down to hell”.
One the most strongest arguments for basements in older HEP’s was that the underpinning involved in the basement process would actually strengthen the foundation of the building. From a theoretical perspective, this is of course correct. Practically, however, cases have arisen where this process itself has damaged the stability of neighbouring properties causing them to subside and in extreme examples partially collapse. One example of this is a townhouse in Chelsea which caused subsidence to such a level where a neighbour could not open her own front door. In another example, a basement collapsed on a builder whilst carrying out works unfortunately resulting in fatality. The legal complications following such instances are astounding: a criminal investigation by the HSE is usually concurrent with claims against the contractor, the architect, the structural engineer and so on. When such levels of defects during construction works occur, they are capable of stalling the entire projects for months based on legal issues alone, putting to one side adjudication process.
The legal issues however, do not end there. Take for example instances where the basement is built in an area with a high water table. In such examples, cases have arisen where the problem has not been immediately noted during construction, but has arisen either months or at times years after the completion and sale of the property – by this time the contractor alone could have gone insolvent. In such instances, the monitoring of the basement is also essential.
The above examples have themselves given rise to another legal complication in relation to basements: planning law. It is important to note that the problems with basements have not gone unnoticed in the planning circles and local authorities are stepping up their regulations to deal with this rise. Arup recently published a draft report for Kensington & Chelsea Council dealing with such matters and the implementation of the same is now monitored in the specialist circles. It follows that where in the past designs which were ambitious at best, and outrageous at worst could go through various Councils’ loopholes – such cases are increasingly subject to scrutiny and planning challenges. This is hardly surprising – residents in HEP neighbourhoods are becoming agitated with the constant flow of construction works and digging that has plagues such areas which has itself given rise to the number of nuisance claims. It follows that as a result, even freeholders are now beginning to refuse permission for basement extensions (as was in the case of Constance Long Holdings Limited v Gerald Cavendish and others  EWHC 3434 (TCC).
In spite of the above, the legal solution to the above, provided it is sought from specialists, could be rather straightforward. The most important factor to note is the concept of caveat emptor – buyer beware. If a property is being purchased during the development phase, naturally, warranties and other such forms of protection must be provided in deed form. Warranties are obviously subject to insurers agreements and some wrangling will be involved – but they are essential in cases where one party in the development team could go insolvent. The warranty should come from the Developer, Contractor, Architect, Structural Engineer and other professionals who play a key role in the design and building or converting of the project. Should defects or other problems arise, the Developer or Contractor will of course be the first held accountable. The builders and those involved in the project would probably therefore wish to insert an express caveat in the contract to relieve them of their obligations. Whilst this is a natural step the Harrison case referred to above however, does throw some form of confusion into this matter as it allows consumer regulation amongst other legislation to step in if the basement is not fit for purpose. It is essential to point out however that an express waiver in the convenyancing process will still alleviate the problem for the seller – but not others who have provided warranties or liability under the building contract.
With specialist legal advice, it is rather straightforward to present a strong legal argument. From a practical perspective, however, this comfort should not taken lightly. It is all good and well to rest assured that you are able to sue if something goes wrong, however, taking into account that the basement forms part of the foundation of building, if something does go wrong, regardless of one’s ability to sue, the impending pandemonium of litigation and remedial works will cause a significant hassle to the end user and their neighbouring properties. The property will be rendered at least borderline useless whilst the basement works are carried out – let alone the damage to materials; such as home cinema equipment in a flooded basement. As basements are also rather personal, and involve the construction of swimming pools and tennis courts in extreme circumstances, they also affect and limit the saleability of the same to buyers with very similar, if not identical taste.
It is unlikely that the building of basements will slow down significantly, however, it is essential for all parties to adequately consider their legal liabilities alongside practical problems that arise. Specialist legal advice and professionals must be involved. It follows that in some instances, the same team involved in the design and build of the Channel Tunnel were involved in the design and construction of a basement. Whilst this area of law, from a specialists’ perspective at least, is rather straightforward to deal with it – it is the practical problems that arise going forward that cause more worry and these will not be dealt with by case law but rather practical regulations. Arup’s report, which calls for the consideration of, amongst other matter, the Geology, the Hydrology and nuisance prior to the granting of planning permission is cautiously welcomed – but it is in how it is applied that one could seek to find out if regulation can make matters better, or far worse.
By Tom Keya