Commercial Litigation Senior Associate Charles Lethbridge explains how sweeping law reforms could strengthen protections for homeowners making a claim for building defects in NSW.
The building industry is set for a significant overhaul as legislative reforms giving stronger protections to homeowners move through the New South Wales Parliament. The Professional Engineers Registration Bill and Design and Building Practitioners Bill were introduced in October, following emergency evacuations of Opal Towers (pictured) and Mascot Towers, and the NSW Government’s response to a Federal Building Confidence Report.
The Confidence Report confirmed the experience of too many homeowners in NSW, finding that there is a “prevalence of serious compliance failures in recently constructed buildings”. It recommended a comprehensive plan to address these issues, alongside legislative reforms, which the NSW Government has promised to move closer to finalisation in 2020.
The proposed laws could mean homeowners have more avenues available when seeking compensation for a building defect in NSW.
Currently, building contracts in NSW usually contain terms in relation to defect liability periods in respect of building works which is typically between 12 months and 24 months from the practical completion of the building works. However, contractual defects liability periods cannot remove or limit statutory warranties.
Current critical time periods for making a claim
Currently, successors in title are unable to bring a claim relating a defects liability period – only a party to a building contractor can bring such claim. The following time periods apply in respect of commencing statutory warranty claims for building contracts entered into on or after 1 February 2012:
- For major defects – 6 years (with a six-month extension if a building defect becomes apparent during the last 6 months of the statutory warranty period); and
- For defects which are not major defects – 2 years (with a six-month extension if a building defect becomes apparent during the last 6 months of the statutory warranty period).
A major defect is one which concerns the structural integrity/stability of the building, a fire safety system, waterproofing or another element as prescribed by the regulations of the Home Building Act. In essence, a major defect may be defined as a serious problem which impacts upon habitability and the use of the building and goes to its potential destruction or collapse.
Current restrictions on NSW homeowners
Currently, there is a very high threshold to satisfy in any claim for negligence against a builder or developer. There is a 6 year limitation period for pursuing a claim in negligence from the date that a defect becomes known.
Homeowners may also have a claim for misleading and deceptive conduct against a builder or developer and the time limit for commencing such an action is 6 years from the date that the cause of action accrues.
Proposed Reforms for NSW Building Industry
In light of recent evacuations of buildings in NSW the standard of quality in the building industry has been the subject of significant media attention and the Government has issued a report making recommendations to improve building practice standards. The Government has announced it intends introducing a robust regulatory framework for the construction of buildings NSW. Those reforms include:
- Building practitioners will owe a common law duty to owners corporations and subsequent residential homeowners;
- Building designers such as architects and engineers are to declare that building plans comply with regulations;
- A building commissioner is to be appointed to act as the consolidated regulator;
- A register of engineers and certifiers is to be created.
Significantly, current High Court authorities dictate that a duty of care cannot be imposed unless it can be demonstrated that homeowners were vulnerable and unable to protect themselves from the builder’s lack of care/negligence.
In circumstances where a building contract contains detailed provisions in relation to the liability for defects, it was unlikely that parties were vulnerable. Further, the High Court has held that such a duty of care is unlikely to apply to subsequent owners who are sophisticated commercial parties.
Accordingly, government reforms aim to insure that property owners have more avenues available when seeking compensation for defective building works.
How Attwood Marshall Lawyers can help with a building defect in NSW
Attwood Marshall Lawyers has recently acted for both homeowners and building practitioners in significant class actions in respect of major building defects. One case concerned the waterproofing of a building, the other concerns a fire which broke out at Cathedral Place in Brisbane in 2013. In both matters, as well as in numerous other smaller building disputes, Attwood Marshall Lawyers has achieved successful outcomes on behalf of both builders/developers and homeowners.
In our experience, defects (minor or major) to building works are an inevitable part of the building process and they are not necessarily attributable to a builder’s poor workmanship. As occurred in the above case concerning a building’s waterproofing, the fault lay with a poor quality walling system which had been imported from Asia.