Statutory Warranties and the Home Building Act 1989

The Home Building Act 1989 (“the Act”) provides statutory warranties which are expounded in section 18B of the Act and are implied into every building contract to do residential building work.

These warranties relevantly include that the building works “will be done with due care and skill and in accordance with the plans and specifications set out in the contract” and that the materials will be “all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new”.  This is set out in section 18B(a) and (b) of the Act.

The warranties also provide that “the work will be done in accordance with, and will comply with, the Act or any other laws”, “the work will be done with due diligence and within the time stipulated in the contract”, the “dwelling is reasonably fit for occupation” and the materials used are “reasonability fit for the specified purpose”.  This is set out insection 18B(c), (d), (e) and (f) of the Act respectively.

The Home Building Amendment Act 2014 introduced further amendments to the Act which were effective from 1 December 2014.  The amendments concern the limitation period to commence proceedings and the definition of defect.

The Act now introduces the term “major defect” and this is also part of the amendments.  Previously defects were defined and differentiated as being either structural or non-structural.

This has now been replaced by the term major defect.  For the purposes of the Act and determining whether a defect is a major defect, you will need to refer to the definition of major defect in conjunction with major element, which are defined as follows:

Major defect:

(a) a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause:

(i) the inability to inhabit or use the building for its intended purpose, or

(ii) the destruction of the building, or

(iii) a threat of collapse of the building, or

(b) a defect of a kind that is prescribed by the regulations as a major defect.

Major element:

(a) an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it (including but not limited to foundations and footings, floors, walls, roofs, columns and beams), or

(b) a fire safety system, or

(c) waterproofing, or

(d) any other element that is prescribed by the regulations as a major element of a building.

As a result, the Act now limits the extent of defects that are claimable by a party than were previously claimable and essentially only severe defects are claimable.  Whether a major defect is claimable or not will depend on whether it falls within the definition as referred to above.

Prior to 1 February 2012, section 18E of the Act provided the following limitation period:

(1) Proceedings for a breach of a statutory warranty must be commenced within 7 years after:

(a)the completion of the work to which it relates, or

(b) if the work is not completed:

(i) the date for completion of the work specified or determined in accordance with the contract, or

(ii) if there is no such date, the date of the contract.”

Section 18E was subsequently amended in 2011. The seven (7) year period detailed above was amended to 6 years for a breach that results in a structural defect (as defined in the Regulations) and 2 years in any other case including making a claim for non-structural defects.  This amendment took effect on 1 February 2012 and is not applicable in respect of contracts for residential building work that were entered into before 1 February 2012.

On 25 October 2011 the Home Building Act 1989was further amended to include section 3B, to provide a process of determining the date of completion of the works. This amendment applies to new claims retrospectively and provides that the date of completion is either:

  1. The date the work is complete within the meaning of the building contract;
  2.  If the contract is silent, when practical completion of the work occurs.

For the purposes of the Act, practical completion is now defined and occurs at the earlier of:

  1. The date the contractor hands over possession;
  2. The date the contractor last attended the site;
  3. The date of issue of an occupation certificate.

In working out the relevant time period and whether the amendments apply to you, you will need to ascertain when the strata plan was registered or when the Building Contract was entered into. The date of completion of the building work is quite significant when calculating the last date within which a party is entitled to issue a claim against another party.

Impact

The new amendments will have retrospective effect in relation to the change from structural to major defect.  However, we are of the view these amendments do not have retrospective effect to statutory warranty periods as they relate to Building Contracts entered into prior to 1 February 2012.

It is important to be mindful of all relevant dates.  Legal advice is essential given the strict provisions of the Act, time frames and the numerous amendments to the Act

If you have any questions regarding this article, please contact our Ms Pierrette Khoury, Solicitor Director of Khoury Lawyers.

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