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Can a purchaser rely on an architect’s certificate before it has even been issued?

A recent case overturned a controversial decision where purchasers of flats initially suceeded in a claim against an architect, founded on a negligent misstatement, despite completing the purchase before receiving the certificate. What do architects and builders need to be aware of?

Architects frequently provide certificates to purchasers and their lenders attesting to the satisfactory construction of properties.

In the recent case of Hunt & Ors v Optima (Cambridge) Ltd & Ors [2014] EWCA Civ 714, the Court of Appeal overturned a controversial TCC decision where the purchasers of residential flats had initially succeeded in a claim against an architect, founded on a negligent misstatement, despite completing the purchase before receiving the certificate.

Certificates of satisfaction

Optima, the developer of two blocks of residential flats, engaged Strutt & Parker (S&P) to inspect the development during construction and to provide certificates to the purchasers certifying that the construction had been carried out satisfactorily.

The certificates were offered as part of the sale of the flats, albeit in a number of cases these were not provided until after completion.

“The law provides that, in certain circumstances where a wrong statement is made by one party that is relied upon by another to his or her detriment, this can give rise to a claim in negligent misstatement”

Defects were subsequently discovered and a number of purchasers claimed against Optima and S&P.

The law provides that, in certain circumstances where a wrong statement is made by one party that is relied upon by another to his or her detriment, this can give rise to a claim in negligent misstatement.

Notwithstanding that the purchasers completed the sale before the certificates were received, the TCC held, somewhat controversially, that the purchasers had relied on the certificates because they were aware prior to completion that they would be received.

Awareness not enough

The Court of Appeal disagreed: a mere awareness of the certificates was not enough.

The purchasers must have been able to demonstrate that they had relied on the misstatement and that it had caused a loss.

“A mere awareness of the certificates was not enough”

This was not the case here.

The purchasers cannot have relied upon the certificates in committing themselves to the purchase because, at that point, the certificates were not in existence.

Architects be aware

The Court of Appeal’s decision confirms practitioners’ understanding of the law and will clearly be welcomed by architects.

However, they should remain cautious.

The court considered that the claims may have succeeded if the purchasers could show that they had relied upon the draft form of certificate which had been provided prior to the purchase.

Although this was not argued on the facts, architects should be aware that it may be possible for a statement to be relied upon before a certificate is formally provided.

Steven Carey is a partner in the real estate, construction and engineering team and Chris Busaileh is a solicitor in the construction and engineering team at Charles Russell Speechlys

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