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Apparently this is due to the legal exposure inspectors face post-Grenfell. A lot can no longer get PI insurance. In the OPs case the partially inspected work should transfer back to the local authority and fees be refunded. They haven't gone bust (have they?), they have chosen not to continue to provide this service. The LA inspector needs to pick up from the last point, however you should familiarise yourself with this:
http://www.legislation.gov.uk/uksi/2010/2215/contents/made
Without understanding the detail, my fear is that signing the cancellation notice gets them out of their contract and limits your claim for damages.
if the project has been transferred back and you are a consumer then I would explore issuing a claim for damages - this is in the small claim limit and might not be worth them fighting. As you say its not you terminating, its them.
http://www.legislation.gov.uk/uksi/2010/2215/contents/made
Without understanding the detail, my fear is that signing the cancellation notice gets them out of their contract and limits your claim for damages.
if the project has been transferred back and you are a consumer then I would explore issuing a claim for damages - this is in the small claim limit and might not be worth them fighting. As you say its not you terminating, its them.