Post-DLP Facade Leakage: Contractor, Tenant Alteration or Latent Defect?
A 24-month defects liability period on a newly completed eight-storey office building expired on 31 May 2025. In July, tenants on levels 6 and 7 reported water staining on ceiling tiles and corrosion on sprinkler hangers after every heavy storm. The curtain wall contractor's scope included the facade, and the developer's retention of RM450,000 was released in June. A level 7 tenant installed an additional split-unit condenser in March, penetrating the facade with two unsealed pipe holes without approval. The original builder says the staining is 'condensation from the tenant's air-conditioning' and refuses to attend. Infrared scanning shows two distinct moisture paths: one at a failed gasket joint on level 6 and another around the tenant's penetration. The building has no cavity drainage. The insurer has asked for a written causation position before renewing the policy in 60 days.
1. Determine causation and apportion responsibility between the curtain wall contractor, the tenant and the owner.
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Two defects, two responsibilities.
- Level 6 gasket joint. The infrared scan shows a continuous moisture path at a failed gasket. That is a facade defect within the contractor's scope. DLP expiry does not automatically extinguish liability: check the contract for latent-defect clauses, extended facade warranties (often 10 years) and any performance bond. Independently of contract, a negligence claim may lie within the limitation period.
- Level 7 tenant penetration. Two unsealed holes through the facade are a tenant alteration. Liability depends on the tenancy's alteration and repair covenants and whether written approval was given. If approval was granted without sealing details, the landlord shares responsibility for approving defective work.
- Condensation is implausible as the sole cause: it does not readily explain corrosion on sprinkler hangers and storm-linked staining. The pattern is consistent with water ingress.
- Apportionment. The contractor bears the cost of the gasket and consequential damage attributable to it; the tenant bears the cost of sealing its penetration and damage traceable to it; the owner bears making good of undifferentiated areas.
Judgement: resist a single 'blame' position. Separate the two paths physically by opening up and cost them separately, or the parties will litigate over an undifferentiated bill.
2. Set out the immediate remedial, contractual and evidentiary steps, including how to deal with the released retention.
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Make safe and investigate
- Temporary seal, dry the ceilings, protect sprinkler pipework and electrical fittings, isolate affected circuits, and record moisture readings.
- Instruct an independent building surveyor or engineer to carry out an invasive inspection at both locations and issue a causation report with photographs and thermal images.
Contractual steps 3. Serve notice on the curtain wall contractor reserving rights despite the released retention. Retention release is not a waiver of defects liability; check for a performance bond, parent company guarantee or warranty. 4. Serve notice on the tenant to seal the penetration within a stated period; if it fails, do the work and recover the cost as a debt under the tenancy. 5. Obtain three quotations and keep a cost ledger by cause.
Evidence 6. Preserve the removed gasket, photographs, weather records, maintenance logs and all correspondence. Record who said what and when; the builder's 'condensation' assertion should be tested in the report. 7. Update the asset register and maintenance plan, adding facade gaskets to the periodic inspection schedule.
Judgement: the released retention reduces leverage but does not extinguish the claim; the practical route is often a negotiated contribution supported by an independent report rather than immediate litigation.
3. Draft the position you would give the insurer and the tenants within the 60-day window.
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To the insurer
- Notify now, before the report is complete, and state that investigations are ongoing. Do not admit liability.
- Provide the event history, the two moisture paths, the engineer's preliminary findings, remedial cost estimates and the mitigation steps taken.
- Explain the DLP history and the tenant alteration. Insurers commonly exclude the cost of correcting defective workmanship but cover resulting water damage, so distinguish 'cost of correcting the defect' from 'damage caused by the defect'.
- Ask for a reservation-of-rights letter and confirm whether a separate claim is needed under the contractor's contract works or professional indemnity policy.
To the tenants
- Issue a holding letter with the inspection timetable, access requirements and a named contact.
- Do not promise a repair date until causation is confirmed; explain that temporary sealing is in place and that any further leakage should be reported immediately.
- Remind the level 7 tenant that unauthorised facade penetrations breach the tenancy and the building by-laws, and require details of its contractor.
Judgement: a clear, early, non-committal position protects the renewal and preserves recoveries against both the contractor and the tenant.