Levels, levels, levels - adding floors to existing structures

In a world where most major cities have a lack of vacant space, and where the available space can be prohibitively expensive, adding levels to existing structures is potentially an innovative way to increase a building’s usable space and value. This could involve adding a unique and modern space above an existing building, or alternatively, preserving the continuity in the structure and replicating the existing floors on the additional levels.

We explore below some of the common issues that arise from a construction lawyer’s perspective when adding storeys onto an existing building.

Who has the rights to the design of the existing structure?

The design of the original building is important when adding extra storeys. Building contracts and consultant appointments usually contain some form of copyright licence in favour of the developer regarding the designs produced. Considerations include:

1. Does the developer have copies of the original design and a copyright licence to use it, e.g. under the building contract for the original building or through a collateral warranty?
2. Does the scope of any copyright licence extend to using those drawings for the construction of additional storeys?

For example, clause 2.38 of the JCT Design and Build Contract 2016 provides a copyright licence to copy and use the Contractor’s Design Documents for any purpose in relation to the original works but states that this licence enables the Employer:

“to copy and use the Contractor’s Design Documents for an extension of the Works but shall not include any right or licence to reproduce the designs contained in them for any such extension.”

A developer could therefore refer to and use the original design drawings to inform and assist with the construction of the additional storeys, provided the additional storeys are distinct and not a reproduction of the original design, but replicating the design of the existing storeys would require a further licence.

Suitability of the existing structure

To state the obvious, any developer building on an existing structure will need to have regard to that existing structure, how it has been designed and built and whether it is feasible to add additional storeys.

A key legal issue is the extent to which the design for the extension relies on the underlying structure not having inherent defects. This raises issues such as the below.

• Does the developer have a contractual right to claim against the original contractor if the existing structure turns out to be defectively built such that it cannot withhold the load of additional storeys? For example, under the original building contract or a collateral warranty.
• If defects were discovered in the existing structure, would the losses relating to an inability to add more storeys be recoverable? For example, would these losses be too “remote” because they were not in the reasonable contemplation of the parties when the original building contract was made.
• Has the limitation period expired for such a claim?

The developer is likely to instruct a survey of the existing structure to investigate its suitability. However, this would not provide a guarantee. The surveying company would not be liable for all defects in the existing structure, but only for those that would have been discovered if the survey had been undertaken with the required level of skill and care.

Who insures the existing structure?

The parties would need to consider:

• Who insures the risk of damage to the existing structures? For example, insurance option C in the JCT forms provides that the employer insures the existing structure in the joint names of the employer and the contractor against damage caused by any specified perils.
• Who bears the risk of any shortfall in the insurance? This would usually be the party responsible for the insurance.
• Is the employer obliged to rectify any such damage to the existing structures or can it terminate the building contract? The JCT forms allow the employer to terminate the building contract is such circumstances.

What about disruption caused to any occupiers of the existing structure?

The building contract may have to contain detailed provisions regarding access to the existing structures and the levels of noise and vibration that are permitted during the works so as to limit the disruption to the occupiers of the existing structure.

Conclusion

The potential to add further floors to existing properties is becoming more attractive to developers as land prices in cities increase. However, careful thought is required at an early stage as to how best to allocate the additional risks and what further investigations and insurance can mitigate these risks.

This article was written by Rupa Lakha, James Worthington and Carolyn Davies. If you require any further information on this article, please contact Rupa on +44 (0)20 7427 6731 or at rupa.lakha@crsblaw.com.