The Sunken Cellar Ruling: liability for construction damage without negligence

The Sunken Cellar Ruling: liability for construction damage without negligence

On 12 January 2024, the Dutch Supreme Court (Hoge Raad) issued a ruling that has since kept the construction and real estate law community occupied: the so-called Sunken Cellar Ruling (ECLI:NL:HR:2024:17). The central question: can a contractor be liable for damage to an adjacent property, even if it acted carefully and took all precautionary measures? The Supreme Court's answer: yes, it can.

The facts: a sunken cellar with serious consequences

In 2016, a municipality granted an environmental permit for the construction of a shop with apartments and a basement on an urban plot. The owner engaged contractor Multi-Bouwsystemen B.V. to install a so-called sunken cellar — a construction method in which a prefabricated cellar element is lowered into the ground.

The adjacent property was owned by the claimants, who also operated a wine shop there. What followed:

• During the sinking process, the cellar wall hit an obstacle in the ground and cracked;
• Multi contacted its CAR insurer, who required consultation with the neighbours — the client instructed Multi to continue regardless, without that consultation;
• In the adjacent building, a shop window cracked and serious cracks formed throughout;
• The municipality eventually imposed a construction stop and ordered evacuation and sealing of the building.

The owners claimed compensation from both Multi and the client. Both the district court and court of appeal dismissed the claims: Multi had acted carefully and had not breached any duty of care. The Supreme Court disagreed.

The Supreme Court's judgment

Property damage alone is insufficient

The Supreme Court first confirms the classic starting point: the mere infringement of a property right (property damage in itself) is insufficient for liability in tort (Article 6:162 of the Dutch Civil Code). More is required: an infringement of a right, acting contrary to the law, or acting contrary to a duty of care.

But: a considerable risk can create liability

Then comes the ground-breaking consideration. The Supreme Court formulates in paragraph 3.2.2 a set of factors that — despite careful conduct — may nevertheless establish liability:

'The construction works by Multi carried a considerable risk that damage would be caused to the claimants' building, even if measures to prevent damage were taken and the works were carried out carefully. Where this risk subsequently materialised, it cannot simply be accepted that the claimants should bear the resulting damage.'

The relevant factors identified by the Supreme Court:

1. The considerable risk of damage — even with careful execution;
2. Who benefits from the works — the works served the client's interest, not the neighbours';
3. The extent of the damage — not every form of damage must be tolerated by a third party;
4. Insurability — it is more appropriate for the contractor to insure against liability than for the neighbours to bear the risk.

Based on these factors, conducting construction works resulting in damage can constitute an unlawful act — even without any fault.

What makes this ruling so remarkable?

Liability without negligence?

The Supreme Court formally rejects strict liability (paragraph 3.2.1): there is no automatic liability merely because damage occurred. But in practice, the result comes close to that. If the works carried a considerable risk of damage and that risk materialises, liability is readily conceivable — even if the contractor did nothing wrong.

Advocate-General Hartlief had concluded in favour of dismissing the liability claim, as in his analysis the existing law provided no basis for it. The Supreme Court took a different turn and effectively created a new, open-ended standard.

Reverberations: lower courts follow the ruling

Shortly after the ruling, some thought it concerned an exceptional case. It is now clear that this ruling is being followed in lower court decisions:

• ECLI:NL:RBROT:2024:5358 (District Court Rotterdam)
• ECLI:NL:RBGEL:2024:3636 (District Court Gelderland)
• ECLI:NL:RBDHA:2024:7462 (District Court The Hague)

These are no longer exceptions — the Sunken Cellar Ruling has opened the door to broader application.

Practical implications for real estate and construction

1. Risk analysis is essential before works begin

Contractors and clients must carry out a thorough risk analysis before commencing construction works in urban areas: what risk do the works pose to adjacent properties? If that risk is considerable, liability may follow — even with careful execution.

2. Insurance is not optional, but essential

The Supreme Court explicitly identifies insurability as a factor. Contractors performing risky works near others' properties must be adequately insured for third-party liability. A CAR insurance policy alone may not be sufficient.

3. Consult neighbours: communicate early

In this case, the absence of consultation with the neighbours was a relevant factor. Both contractors and clients are well advised to engage with the owners of adjacent properties at an early stage — this can not only limit liability but also prevent construction stops.

4. Clients are not off the hook

The client was also sued in this case. The fact that he instructed Multi to continue without consulting the neighbours — even though the CAR insurer had expressly required that consultation — played a role. Clients bear co-responsibility for decisions made during execution.

5. Owners of adjacent properties: share your information

The court of appeal had noted that the claimants themselves bore some responsibility for making relevant foundation drawings available too late. Owners of adjacent properties are advised to proactively share relevant structural information — this can both strengthen and protect their position.

Conclusion

The Sunken Cellar Ruling marks a shift in liability law for construction works. A contractor performing risky works in which damage to third parties occurs — even without any fault — may be held liable. The factors that play a role are: the magnitude of the risk, who benefits from it, the nature of the damage, and insurability. For everyone involved in construction projects in urban areas, this ruling is essential reading.

Ruling

This blog post is based on ECLI:NL:HR:2024:17, judgment of the Dutch Supreme Court of 12 January 2024.