Defective Premises Act 1972: Whether Heads of Claim Made in Respect of Fire Safety and Other Defects Should Be Struck Out (Wilson and others v HB (SWA) Ltd and others – 2025)

Where former leaseholders made a claim against a developer on the grounds of defective premises, the court considers whether a number of their heads of claim should be struck out where such losses were not pleaded in the particulars of claim, or where they were shown to be unrecoverable.

The background

In Wilson and others v HB (SWA) Ltd and others [2025], the 40+ claimants were leaseholders of flats within a purpose-built development in Cardiff constructed by developer Redrow between 2004-2007. The developer proposed to undertake extensive fire safety remedial works at the property.

Claimants comprised both past and present leaseholders who were seeking damages on grounds of breaches of lease covenants and under the Defective Premises Act 1972, with heads of claim including damages for service charges and interest, diminution in value of flats, investment and tax liability losses.

Redrow made an application to strike out a number of the claimants’ heads of claim on the grounds that:

• Losses had not been pleaded in the particulars of claim; or
• Losses were “purely speculative or imaginary”, or too vague, and were therefore unrecoverable.

The decision

The developer was largely successful, and the Technology and Construction Court struck out a number of heads of claim, whilst a further claim was summarily dismissed.

The Defective Premises Act 1972 requires those developing new homes and apartments to complete works in a workmanlike or professional manner, and to use proper materials, ensuring that new homes are fit for habitation on completion.

Damages should put the claimant in the position they would have been in had the developer met its obligations under the Act and completed construction of the properties in a workmanlike or professional manner, using proper materials.

Heads of claim here should be reasonably foreseeable and arise from the breach, and may include diminution in value, loss of rental income and loss of use. More remote losses were found not to be recoverable, for example potential future loss of profits or additional tax liability. Taking each in turn:

• Capital losses

This claim sought damages in respect of “diminutions in value of the flats at specific past dates on the basis of defects identified at those dates”. This claim was dismissed.

The claimants had calculated diminution in value to specific dates, but they continued to own the apartments after these dates and eventually gifted them to their children rather than realising them through a sale. The claimants had not suffered the losses as claimed.

• Investment & reinvestment loss

This claim represented “the difference in value, between the dates of acquisition and the dates of disposal, of the [apartments] as an investment compared with an average return on an investment in residential property classed as suitable for secured lending on ordinary market terms within the Cardiff area”.

The court found this loss to be irrecoverable, together with a similar claim for a loss of potential reinvestment profits. The claim was based on the value of a return that may have been made on another, theoretical, investment and did not relate to the consequences arising from the defects in the claimants’ own apartments.

• Rental income

The claimants estimated the difference between the income they would have received from sub-letting their apartments in good condition and the income they actually received, calculated from the date their apartments were purchased until apartments were either sold, or defects repaired.

Whilst loss of rental income is a valid claim, this must be based on fact rather than a hypothetical situation. The claimants must evidence that they were unable to let their flats, or could only do so at a reduced rent. In this case, the claimants could not produce such evidence to quantify any loss.

• Secured borrowing

The claimants made this claim on the grounds that they were unable to borrow against the apartments through secured lending, enabling them to reinvest. The court found this claim to be too remote, and indeed it had not been pleaded nor supported by evidence.

• Inheritance tax & other taxes

Again, the court dismissed these more complex claims, stating that they had not been pleaded or quantified, and finding that “[there] is no reason at all why a developer should be liable in respect of the consequences of a purchaser’s tax planning”.

The claimants had argued that they would have been able to transfer the apartments, or proceeds from sale, to their children earlier if the defects had not existed, giving the children a greater financial benefit. Further, the claimants argued that they were unable to sell the flats with the defects and could not therefore realise their value, thus resulting in the risk of an increased inheritance tax liability.

Advice and action for landlords

This decision is a helpful guide as to the types of losses that will be considered by the courts in applications made under the Defective Premises Act 1972.

Leaseholders seeking damages under the DPA 1972 must be prepared to fully-quantify claims for damages that are based on fact, rather than potential or hypothetical claims, which cannot be quantified and evidenced, or which may be considered too remote. Heads of claim should be reasonably foreseeable and arise from the breach, such as diminution in value, loss of rental income and loss of use.