Hunt v Optima: Warranties vs Professional Consultants Certificates – Why Retrospective Certificates Fail

Short Answer: A warranty and a certificate are not the same thing. A warranty is a contractual promise. A professional certificate is generally a statement of fact, or confirmation by a professional about particular fact. The distinction became particularly important in Hunt & Others v Optima (Cambridge) Ltd [2014] EWCA Civ 714, where the Court of Appeal considered whether purchasers of defective flats could rely upon architects’ certificates issued in connection with the development.

A certificate is generally a statement of fact which makes the Architect labile to the next buyer, subject to the six year rule (e.g. under the Limitation Act 1980). A warranty is a ‘live’ contract – you can compel the warranty provider to fix the defect under the warranty. The first is a claim for a negligence misstatement, the secon is a claim to perform a contract.

The case remains highly relevant to conveyancing and litigation, particularly where a buyer is offered a professional consultant’s certificate (PCC), architect’s certificate or other documentation instead of a structural warranty.

What happened in Hunt v Optima?

Optima developed two blocks of flats in Peterborough and engaged Strutt & Parker to inspect the construction and provide architects’ certificates for purchasers and their lenders.

The certificates stated, in substance, that the properties had been constructed to a satisfactory standard and generally in accordance with approved drawings and Building Regulations.

Unfortunately, the building work was defective and the inspections had also been carried out negligently.

Several purchasers brought claims against the architects. At first instance, the Technology and Construction Court found in favour of the purchasers on various grounds, including negligent misstatement, and considered that the certificates amounted to contractual warranties.

The Court of Appeal substantially overturned those findings.

The critical problem was reliance.

For a number of the purchasers, the certificates were not actually issued until after they had exchanged contracts and completed their purchases. The Court of Appeal held that they could not have relied upon the statements in a certificate which did not yet exist.

That leads to a very important conveyancing question: what exactly is the difference between a warranty and a certificate?

What is a warranty?

A warranty is a contractual promise.

In a property transaction, a properly drafted collateral warranty may give the buyer a direct contractual claim against a developer, contractor, architect or other professional if the promised obligations are breached.

The advantages are obvious.

A warranty can:

• create a direct contractual relationship;
• contain express obligations and standards;
• provide a contractual route to damages;
• identify who is responsible;
• specify the period and scope of liability; and
• potentially give the purchaser greater protection than a mere statement of fact.

But warranties are not automatically better in every respect.

They need to be properly drafted, executed and enforceable. There may be limitations on liability, exclusions, financial caps, limitation periods and other contractual restrictions. The identity and financial strength of the warrantor also matter.

Most importantly, you cannot assume that a document is a warranty simply because somebody calls it one.

What is a Professional Consultants Certificate?

A certificate is normally evidence or confirmation of something.

For example, a professional consultant’s certificate may state that a qualified architect, surveyor or engineer has inspected works and considers that specified requirements have been met.

That can be extremely useful.

A certificate may satisfy a mortgage lender’s requirements where an acceptable structural warranty is unavailable. It can also provide evidence that a suitably qualified professional has been involved in the project.

However, a certificate is not necessarily an insurance policy and it is not necessarily a contractual guarantee. [editors note – under the CML rules – the certificate must be backed by indemnity insurance, so the insurance company will accept the claim if the certificate is given negligently)

This is where conveyancers need to be careful.

The wording, circumstances and legal effect of the particular certificate must be examined rather than assuming that “certificate” means “warranty”.

Why did the professional consultants certificate fail in Hunt v Optima?

The Court of Appeal concluded that the certificates in question did not amount to contractual warranties.

The language of the certificates was important. They were statements concerning the construction and inspections rather than clear contractual promises by the architects to the purchasers.

There was another, even more fundamental problem for several purchasers: the certificates were issued too late.

If a buyer exchanges contracts on Monday and receives the signed certificate on Friday, the buyer cannot normally say that they relied upon the statements contained in that certificate when deciding on Monday to enter into the binding contract – because the certificates did not exist at the point of exchange.

As the Court of Appeal made clear, reliance cannot ordinarily be retrospective. The representation must exist before it can be relied upon.

This is the real warning from Hunt v Optima.

Why retrospective Professional Consultants Certificates are dangerous

A retrospective certificate can look reassuring because it appears to solve a documentation problem.

The building is already finished. The buyer is ready to complete. Somebody says: “Don’t worry – we’ll get the architect to issue a certificate.”

That may not solve the legal problem.

If the certificate is only produced after exchange or completion, questions immediately arise:

What did the buyer rely upon when exchanging contracts?

Was the professional already assuming responsibility to the buyer?

Was there a contractual obligation to provide the certificate?

Was the certificate itself intended to create contractual rights?

Did the professional actually inspect and supervise the works?

A document produced after the transaction cannot automatically rewrite what happened before the transaction.

Warranty or Professional Consultants Certificate: which is better?

There is no universal answer.

A warranty generally provides stronger contractual protection because it is based on enforceable promises.

A certificate may nevertheless be perfectly adequate for a particular transaction, particularly where it is issued by an appropriately qualified and insured professional and is acceptable to the mortgage lender.

The real question is not simply “Do we have a certificate?”

It is:

What does the document actually protect, who is liable, when was it issued, and can the buyer or lender legally rely upon it?

The conveyancing lesson

Hunt v Optima is a useful warning against treating paperwork as a substitute for legal protection.

If a property is being sold with an architect’s certificate, professional consultant’s certificate or similar document, the conveyancer should establish what it actually says and whether it meets the lender’s requirements.

If a certificate is being produced retrospectively, extra care is required.

A retrospective certificate may provide useful evidence, but it should not automatically be treated as equivalent to a warranty or insurance-backed structural protection.

The safest approach is to identify the required protection before exchange of contracts, not attempt to create it afterwards.

For buyers of new-builds, converted properties and recently renovated buildings, this distinction can be worth understanding before committing to the purchase. As Hunt v Optima demonstrates, getting the document eventually is not necessarily the same thing as having the legal protection when you needed it.