The Gazette 1978

DUBLIN SOLICITORS' BAR ASSOCIATION

Comment on the National House

Building Guarantee Scheme

This Scheme was set up by the Construction Industry

Federation, with the approval of the Department of the

Environment, in September 1977. Since its introduction,

the Scheme received very considerable and, in some

respects, potentially misleading publicity from all

branches of the media. The Dublin Solicitors' Bar

Association is concerned to warn its members and the

public about certain inherent shortcomings of the Scheme.

Broadly, the scheme is intended to give to the

purchaser of a new dwellinghouse, purchased within the

terms of the Scheme, a guarantee in respect of "major

structural defects" arising within six years of completion

of the dwelling.

Claims under the guarantee are limited to £15,000 on

any one house and to £250,000 against any one builder.

"Major structural defect" is defined within the scheme

as "any major defect in the foundations of a dwelling or

the load-bearing parts of its floors, walls and roof or

retaining walls necessary for its support which affects the

structural stability of the dwelling".

"Dwelling" is defined as "any house, bungalow,

maisonette or flat including any garage forming an

integral part of the structure thereof".

The Law Reform Commission, in its Working Paper

No. 1-1977 entitled "The Law Relating to the Liability

of Builder, Vendors and Lessors for the Quality and

Fitness of Premises", commenting on the draft of the

present Scheme (which was all that was available at that

time) stated that the Scheme, as proposed, seemed to

suffer from certain serious defects and listed the most

important as being:

1. that the proposed Scheme would cover "specu-

latively built houses" only. Contract houses or

incompleted houses would not benefit from the

protection of the Scheme;

2. that the Registration Body created under the Scheme

would guarantee major structural defects only; minor

structural defects, or non-structural defects, would

not be guaranteed;

3. that the guarantee would be limited to a period of six

years only. The Working Paper points out that

similar schemes in Northern Ireland and England

give a ten-year structural guarantee;

that the Registration Body administering the Scheme

would be run by the C.I.F., that it would be a

builder's body exclusively and would have no outside

representation. While two Government Observers

would be permitted to attend, no other interests

would be represented, such as consumers, finance

houses, trade unions, etc. Since at present the C.l.F.

represents a mere 30% (approx.) of all builders in

Ireland, the composition of the Registration Body

would not be sufficiently representative to inspire the

public confidence necessary for the success of such a

schcmc)

5. that the guarantee would take effect only after the

purchaser had failed to get satisfaction from the

builder. Primary liability would lie at all times with

the builder and the purchaser must show that he had

exhausted his remedy against the builder before he-

could claim against the Registration Body. The

Working Paper points out that under the English

Scheme, the Council's liability is wholly independent

of the builder's liablity;

6. that the Scheme would not guarantee the solvency of

the builder and would fail to protect a purchaser

against the loss of his deposit or any interim

payments should the builder become bankrupt or go

into liquidation, before the dwelling has been

completed.

Examination of the Scheme, in the light of the above

points, establishes that the Law Reform Commission's

criticisms of the draft version were substantially valid, as

all the defects listed in its Working Paper have been

carried through into the Scheme as introduced.

There can be no doubt that the operation and scope of

the Scheme is very limited. The Scheme applies only to a

restricted figure of £15,000 in respect of any one dwelling

seems almost inadequate already and is not index-linked.

The maximum figure of £250,000 recoverable in respect

of any one builder may seem a reasonable sum but, in the

context of a big builder on a large estate, it is a very small

sum indeed.

The provision that the protection of the Scheme will

only become available when the purchaser has exhausted

his remedies against the Builder is particularly worrying.

It could take at least eighteen months or two years to

exhaust any remedy against the Builder and any

guarantee Scheme that only came into effect after such a

lapse of time would be of little benefit. It was hoped that

the C.l.F. had accepted this point, but it is alarming to see

their President quoted in the

Irish Times

recently as

saying "Responsibility for faults was taken by the Builder

of the house, and the guarantee applied to the purchaser

or his successors only if the builder defaulted".

That the Scheme fails to guarantee the solvency of

Builders during the construction of the dwelling leaves the

purchaser open to a serious risk which it would have been

hoped any such Scheme could have cured. The size of

booking deposits and stage payments being sought today

and the number of building companies which are newly-

formed limited liability companies, having only a small

capitalisation, means that the risks taken by purchasers

who pay deposits to such builders are very considerable.

Further concern is caused by the manner in which the

Schemc is, at one and the same time, extended to protect

succcssors in title to the original purchasers of dwelling-

houses, but limited in the extent of that protection. The

Scheme provides that a Builder shall have no liability to a

successor in title to a dwellinghouse where the successor