With so little information to go on, it is impossible to say what is wrong (how bad, where, how come 2 years passed and nothing showed) - you can imagine the builder saying this.
Can she take the builder to court (small claims)? - yes, of course she can try. She would have to demonstrate that it is an inherent defect caused by the construction method, and not something else caused by her existing property or some event later.
What happens if he doesn't respond to a letter? - nothing, it neither strengthens or weaknesses the case. But one can guess that it is unlikely he will respond.
This sounds like a non-starter. She may well have to spend more on specialist reports to propose the exact source of the defect, to demonstrate the builder's errors - the report she has presumably just says there is damp in there.