What is the usefulness to a buyer of the type of Professional Consultant’s Certificate in new-build conveyancing referred to in the CML Handbook? The case of Hunt & Ors v Optima (Cambridge) Ltd & Ors [2014] EWCA Civ 714 relates to an action brought by eight purchasers against Optima, the developer of a block of flats, and Strutt & Parker (S&P) who were engaged by the developer to issue architects’ certificates to purchasers of flats in relation to the construction work. It was alleged that the building works carried out by Optima were defective, and that S&P had carried out a negligent inspection of the building works and had therefore negligently issued architects’ certificates. The claimants alleged that S&P owed them a duty of care in negligent misstatement arising out of the negligent inspection and the issue of the certificates.
While timing issues differed slightly in some of the claimants’ cases, S&P’s defence was essentially two-fold: (1) that any duty of care arose out of the issue of the certificates alone (not the inspection process), and that since the architects’ certificates were not issued to the purchasers until after they had exchanged contracts (and in many cases completed), it could not be said that the purchasers had relied upon the certificates when entering into their contracts, and buying their flats; and (2) that the certificates were merely statements upon which reliance could be placed, and were not to be construed as contractual warranties. The court agreed with S&P, and held that because of the time at which S&P’s certificates were issued, it had assumed no responsibility to the purchasers.
CML Handbook 6.7.4 states that: “Where the property does not have the benefit of a [new property scheme such as the NHBC scheme] and has been built or converted within the past 6 years check part 2 [of the CML Handbook] to see if we will proceed and, if so, whether you must satisfy yourself that the building work is being monitored (or where the work is completed was monitored) by a professional consultant. If we do accept monitoring you should ensure that the professional consultant has provided the lender’s Professional Consultant’s Certificate which forms an appendix to this Handbook or such other form as we may provide.” Clearly, completing a mortgage without such a certificate having been provided causes the conveyancer to breach the terms of its retainer with the mortgage lender. However, exchanging contracts to buy property without such a certificate also creates a risk of breach of duty.
Where buying off-plan, the certificate will not be available until practical completion. The buyer will need to have the benefit of a contractual duty from the developer to procure the issue of a certificate prior to actual completion. However, the buyer will be unable to rely on the certificate because he has already committed himself to the purchase by exchanging contracts. In such circumstances, it cannot be said that the buyer has relied upon the certificate. The certificate is of use to the buyer’s mortgage lender, but of no use to the buyer. What the buyer needs is an assurance from the consultant prior to exchange of contracts that a certificate, in the form of a draft agreed prior to exchange, will be given to the buyer prior to actual completion, and an ability for the buyer to refuse to complete with the developer if the certificate is not forthcoming.
The case demonstrates the differences between NHBC protection (effectively, an insurance policy covering defective works), collateral warranty/duty of care deeds (giving rise to actions for breach of warranty – actions in contract), and architects’ certificates (which are intended to give rise to a duty of care in tort). For a duty of care to arise under an architect’s certificate, the law of negligent misstatement is engaged. The recipient of an architect’s certificate will enjoy the protection of an action in tort if the information provided in the certificate is inaccurate and, as a result, loss is sustained. However, reliance is the key element, and a buyer can only be said to have relied upon a certificate if it had been made at the point when the buyer became committed to the purchase. In contrast, a breach of warranty claim depends simply upon being in a contractual relationship – whether the contract between the buyer and the consultant is created before a contract to buy is entered into, or after.