By virtue of Section 18E of the Home Building Act, proceedings for a breach of a Statutory Warranty must be commenced before the end of:
- 6 years for a breach that results in a major defect in residential building work, or
- 2 years in any other case.
“major defect” is defined to mean:
- 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:
- the inability to inhabit or use the building (or part of the building) for its intended purpose, or
- the destruction of the building or any part of the building, or
- a threat of collapse of the building or any part of the building, or
- a defect of a kind that is prescribed by the Regulations as a major defect.
“major element” of a building is defined to mean:
- 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
- a fire safety system, or
- waterproofing, or
- any other element that is prescribed by the Regulations as a major element of a building.
Statutory Warranty Period
The warranty period starts on completion of the work to which it relates or, if the work is not completed, on:
- The date the contract is terminated, or
- If the contract is not terminated, the date on which work under the contract ceased, or
- If the contract is not terminated and work under the contract was not commenced, the date of the contract.
The completion of residential building work under the Home Building Act will occur on the date that the work is complete within the meaning of the contract under which the work was done (although there is a specific provision contained in the Act relevant to determining the date of completion of new buildings in strata schemes).
If the contract does not provide for when work is complete (or if there is no written contract), the completion of residential building work occurs on “practical completion“ of the work, namely, when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose. In this case, it will be presumed, unless an earlier date for practical completion can be established, that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work:
- The date on which the contractor handed over possession of the work to the Home Owner,
- The date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion),
- The date of issue of an Occupation Certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work, or
- In the case of owner-Builder work, the date that is 18 months after the issue of the Owner-Builder Permit for the work.
If the residential building work comprises the construction of 2 or more buildings, each of which is reasonably capable of being used and occupied separately, practical completion of the individual buildings can occur at different times (so that practical completion of any one building does not require practical completion of all the buildings).
Extending Limitation Periods
There are two (2) situations in which the time for the commencement of proceedings for a breach of a statutory warranty may be extended, namely, where:
- Any person entitled to the benefit of a warranty first becomes aware (or ought reasonably have first become aware) of the breach, within the last 6 months of the applicable warranty period, in which case proceedings may be commenced within a further 6 months after the end of the applicable warranty period, and
- A building bond has been lodged for building work under Part 11 of the Strata Schemes Management Act 2015 (NSW), in which case the period of 2 years specified for commencing proceedings for a breach of a statutory warranty for that work is extended until the end of 90 days after the end of the period within which a final inspection report on the building work under that Part is required.
Significantly, the fact that a person entitled to the benefit of a statutory warranty has enforced the warranty in relation to a particular deficiency in the work will not necessarily prevent the person from enforcing the same warranty for a deficiency of a different kind in the work if:
- The subsequent claim is brought within the relevant limitation period, and
- The other deficiency was in existence when the work to which the warranty relates was completed but the person did not know, and could not reasonably be expected to have known, of the existence of the other deficiency when the earlier warranty was enforced.
A successor in title to a person entitled to the benefit of a statutory warranty under the Home Building Act has the same rights as the person’s predecessor in title in respect of a statutory warranty, as does a person or entity who is the owner of the land but is not actually a party to a contract to do residential building work on the land.