Zennstrom v Moseley & Wilks

 

The Message

Residential property owners owe limited duties to purchasers.

The Case

The High Court has considered whether owners who rebuild houses they live in are liable to purchasers under the Defective Premises Act 1972 In November 2009, Mr and Mrs Zennstrom agreed to buy a property overlooking the marina in Hamble, Southampton for £1.1 million. Mr Zennstrom was a co-founder of Skype.

The vendors, Ms Moseley and Ms Wilks, had completely rebuilt the property about a year earlier. They had bought it in 2004 for only £360,000 and claimed they were selling as Ms Wilks was changing her career and they could no longer afford the outgoings on the property.

Following completion of the purchase, the Zennstroms claimed they learnt of such substantial defects in the construction of the house that it had to be completely demolished and rebuilt. They claimed that the vendors had concealed defects from them and that the Defective Premises Act 1972 applied as the vendors had developed the house for sale and not their own use.

The Defective Premises Act provides that a person who in the course of a business carries out work on the building of a dwelling owes a duty to the purchaser and any subsequent purchaser to see that the work is properly undertaken and the dwelling will be fit for habitation. The main purpose of the Act is to allow subsequent purchasers to sue one or more of the developer, architect, surveyor or engineer if the house is seriously defective.

In this case, the builder was of apparent little worth and it was unclear whether  the architect was insured so the Zennstroms argued the vendors were liable under the Act as they had redeveloped the house for re-sale and profit and, therefore, had done so for business and not private reasons.

The Court accepted that the Act could apply if a residential owner did redevelop a house not to live in it but sell it for profit. However, the Court held that the Zennstroms had a heavy burden of proof to satisfy in this case. They not only had to establish the vendors intended at the time they decided to rebuild it that they would sell it as soon as they could after completion but also that they did not intend to occupy the new house as their home for anything other than a minimal period.

The Court considered the background history in great detail. It was the Zennstroms case that the vendors had a history of buying properties to do up whilst they lived in them and then sell They argued that the vendors had overstretched themselves when they bought this property so had decided to sell it once re-built and their Counsel very forcibly cross-examined both vendors as to their intentions and conduct.

The Court, however, found the vendors to be honest witnesses who, like many owners of properties, had simply moved up the property ladder as house prices increased. It found no evidence they had ever intended to carry on any property business and there were a number of very telling factors which stood in their favour. For example, there were many unusual features in the new house which were intended to meet their own particular tastes and not that of a purchaser and the vendors never sought to register as builders to come within the NHBC Buildmark Scheme and thereby be able to more readily sell the house.

Given that the vendors had lived in the new house for a year before selling it, and various witnesses testified that they had always treated the new house as their intended home, the Court was completely satisfied that the Act could not apply and no duty was owed to the Zennstroms regarding the construction of the house.
The Court was also fully satisfied that the vendors had not sought to conceal defects  and it noted there had been 15 inspections by the building inspector during construction which had revealed nothing untoward and the Zennstrom’s own surveyor had not found fault with matters now complained of.

Accordingly, the claim failed and the Zennstroms will have to meet the re-building costs unless any recourse is possible under the Act against those persons who were involved in the rebuilding of the house in the course of their business.