Building Defect Warranty Claims - Retrospective Changes - Draft Home Building Regulation 2014

David Bannerman

The draft Home Building Regulation 2014 has been released with an expected commencement date of 1 December 2014. Public consultation is currently underway, however in recent times public consultation has not resulted in a change of position for increased consumer rights. 

If the draft Home Building Regulation 2014 and the Home Building Amendment Act 2014 (Amendment Act) commences on 1 December 2014 in their current form, there will be adverse retrospective consequences for consumers and owners corporations including those below.

  • Start time for the warranty changing for new strata buildings

Firstly, for all building contracts for new strata buildings and home warranty insurance contracts for new strata buildings provided by SICorp after 1 July 2010 the warranty period will start at a different time. Not from completion of the works as defined in section 3B of the Home Building Act 1989 but from the date of an occupation certificate, which could be before completion of the works.

  • 2 year period of time to become aware of all defects and commence Tribunal or Court proceedings and notify the home warranty insurer

Secondly, and more importantly, for all building contracts entered into or deemed to have been entered into on or after 1 February 2012 and all home warranty insurance contracts entered into on or after 1 July 2002 consumers and owners corporations will effectively have 2 years* from the start time mentioned above to become aware of all defects and commence proceedings against the builder, developer or sub-contractor and notify the home warranty insurer.

This is due to the proposed change of the existing entitlement to claim for “Structural Defects” within 6 years being abandoned and instead such defects must be a “Major Defect” in a “Major Element” which is so severe as to cause the building or part of it not to be able to be used, to be destroyed or for there to be a threat of collapse. 

Therefore, only defects so severe as to cause collapse, destruction or non-use can be claimed up to 6 years* from completion, which in our experience is extremely rare, so in practical terms the warranty and insurance is for 2 years*.

There are other numerous adverse retrospective consequences as set out in the below article.

Time and Building Reforms may affect Owners and Owners Corporations: Why Owners Need to Consider Action Now!

Ability to avoid retrospective provisions in the Amendment Act

These retrospective provisions will not apply to proceedings already commenced or insurance claims made before the Amendment Act commences.  Therefore where possible become aware of all defects and commence proceedings and lodge insurance claims before 1 December 2014.

Note: * If the breach of warranty becomes apparent within the last 6 months of the warranty period, notification to the home warranty insurer may be made or proceedings may be commenced within a further 6 months after the end of the warranty period. However, a breach of warranty becomes apparent when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach, not when a report is provided.

 

***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.

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