The architect's budget was wrong: cost overruns and negligent estimates

Building projects often cost more than expected. Sometimes that is the builder's pricing, a change of mind by the client or a rise in material costs. Sometimes the design was never capable of being built for the budget the client gave, and the professional knew or should have known. This guide explains when the law treats a wrong budget or estimate as the responsibility of an architect or other consultant, for clients in England and Wales. Disputes with a builder over quotes and extras are covered in the builder disputes series.

Was cost advice part of the job?

The first question is what the professional was engaged to do. Some appointments include cost advice or a duty to design within a stated budget. On larger projects, cost advice is often given by a separate quantity surveyor or cost consultant, and the architect's role is to design to the brief. On small domestic jobs there may be no formal cost advice at all, just a comment in a meeting.

Whatever the role, the duty is to use reasonable care and skill (Consumer Rights Act 2015, s.49 for consumers; Supply of Goods and Services Act 1982, s.13 for businesses). An estimate is not a guarantee of the final cost.

Riva v Foster + Partners

The leading recent example is Riva Properties Ltd v Foster + Partners Ltd [2017] EWHC 2574 (TCC). The client wanted a hotel near Heathrow. Its case was that the architects knew its budget, which rose to £100 million, but produced a scheme that the client's cost consultant priced at £195 million. The client said the architects told it the design could be "value engineered" down to the budget and advised it to obtain planning permission first. The client obtained planning permission, but could not fund the scheme, which it eventually discovered could not be reduced to anything like the budget.

The judge found that:

• the architects were "obliged to ascertain and consider the budget, which was a key requirement and constraint";
• they were "obliged to design the Development to the budget indicated", which had risen to £100 million; and
• they had a duty to advise the client that its design could not be value engineered to that figure.

Breach of those duties was established.

How the loss is measured

The usual approach in contract is to put the client, so far as money can, in the position it would have been in had the contract been properly performed. In Riva, the judge explained that a claimant may instead claim on a "reliance basis", recovering expenditure wasted in reliance on the contract, and that both methods aim to put the claimant "in no worse a position than if the contract had been properly performed".

In that case:

• The fees spent on the scheme that could not be built were recoverable. The judge found they "will have to be incurred again" on a replacement scheme, so they were abortive.
• The claim for lost profits from the hotel, said to have been delayed, failed "for reasons of causation".

The case shows the questions a court asks. What would the client have done with correct advice: abandon the project, scale it down, or go ahead at a higher price? Which costs were genuinely wasted, and which would have been spent anyway? If a client would have gone ahead with the same project at the true price, the extra cost may not be a loss caused by the advice at all. These questions turn on the evidence. See how loss is measured.

Evidence in budget claims

Budget cases are often won or lost on what was said, when, and in writing:

• the budget the client gave, and whether it was a target or a firm limit;
• every cost estimate or cost plan, who prepared it, and what it assumed;
• tender returns, and how far they departed from the estimates;
• changes the client asked for along the way, which may explain part of any increase;
• any advice that costs could be brought down by "value engineering", and what that was meant to involve.

What a solicitor will want from you

• The appointment of the architect and of any quantity surveyor or cost consultant.
• Emails, minutes or briefs recording the budget you gave, with dates.
• Every estimate, cost plan and fee proposal, and the tender returns or builder's quotes.
• A list of design changes you requested, and when.
• What you have spent so far, on fees and otherwise, and what you would have done with correct advice.

Run the free case check

This guide is general information about the law of England and Wales. It is not legal advice. Whether an architect or consultant is responsible for a wrong budget depends on their appointment, what was said and expert evidence, and the loss depends on what the client would have done with correct advice.