What is an Inherent Defect?
A latent or inherent defect is a defect in the design and construction of a building or the materials used that is not apparent from an inspection. So who is responsible for inherent defects?
Does an inherent defect always have to be repaired?
A covenant to repair does not carry with it an obligation to remedy poor design or construction or any other defect that has not caused damage to the property. Where there is no damage remedying the defect would be an improvement rather than repair and there is no obligation on either the landlord or the tenant to make good the defect.
Where the inherent defect does cause damage there is no escape from liability merely because the need for repair is due to an inherent defect. The repairing obligation would still be applicable. Sometimes a party can only repair the disrepair resulting from the defect by curing the defect and may then become liable for both.
In a multi-let building where the landlord takes on certain repair obligations and re-charges them to its tenants the same obligations would apply and the tenant may end up paying for an inherent defect to be made good.
In older buildings it is unlikely that there will be inherent defects, however, in new buildings it should be specifically considered and addressed between the parties.
A tenant would want:
- its repairing obligation to specifically exclude any inherent defects and a corresponding obligation on the Landlord that it is responsible; and/or
- Warranty protection, including specific product warranties and collateral warranties from the parties involved in the original design and construction of the building; and/or
- Insurance. But, this can be expensive and there are limitations on who is insured, when a party can claim and the limit of liability
In addition the service charge contribution or costs should be capped or an exclusion in relation to costs attributable to any inherent defects.
A landlord needs to be confident that it can recover these additional repairing costs.
A landlord would want:
- a full suite of collateral warranties or direct contracts with the parties involved in the original design and construction of the building. and/or
- latent/inherent defects insurance.
Forms of exclusion
If the landlord agrees to a form of exclusion for inherent defects it should ensure that this is not on-going. It is 
usually limited in time and limited to the ability for the landlord to recover the costs elsewhere. (either through warranties or insurance). Alternatively the landlord may prefer to obtain warranties for the tenant and the repair obligations to remain. However, this would not affect the service charge costs (if any).
The landlord should not accept an exclusion in relation to older buildings.
