Although the changes to the Act came into force on 15 March 2015, few people understand it has been changed and what effect it has on their rights when entering into a residential building contract with a builder.
What are the Key Changes?
Statutory Warranties:
- The Act previously required work to be performed “in a proper and workmanlike manner” – the legislation now requires that work is to be “done with due care and skill” .
- The term “structural defect” is replaced with the concept “major defect” in order to cover significant defects that may not be structural in nature: in other words, the range of defects covered by the former “structural defect” enforcement regime has broadened generally.
A “major defect” is defined in section 18E, which deals with breaches of statutory warranties by the builder, of the Act generally as:
A defect in a “major element of a building” that has been caused by 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.
A “major element of a building” is defined generally to mean:
- An internal or external load-bearing component of a building that is essential to its stability, 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
- or any other element prescribed by the regulations.
The limitation period for commencing proceedings for an alleged breach of a statutory warranty is now 6 years for a major defect, and 2 years for non-major defects.
The shorter limitation period for non-major defects has been the subject of protests by owners’ corporations because of the tighter time frame for claims to be made on defects that previously fell within the meaning of “structural defect”.
Defences
The defences available to a builder, to a claim for breach of a statutory warranty have been expanded. It is a defence for the builder to prove that the deficiencies of which the owner complains arise from:
- Instructions given by the owner, contrary to the advice of the person who did the work (being advice given in writing before the work was done), or
- Reasonable reliance by the builder on written instructions (given before the work was done or confirmed in writing afterwards) by a professional acting for the owner, who was independent of the builder.
Duties of Claimants
A person relying on the benefit of a Statutory Warranty now has obligations:
- to mitigate loss (to reduce the loss and not to increase it);
- to make reasonable efforts to give written notice to the builder within 6 months after the breach becomes apparent;
- not to unreasonably refuse a builder or sub-contractor access to the site to rectify any defective work;
- and failure to comply may be taken into account by a Court or Tribunal.
These provisions increase the options available to builders to defend claims.
Extension of Statutory Warranties
The statutory warranties are implied in all contracts for the construction of residential buildings.
This increases the chances that sub-contractors will be liable to the builder or principal contractor for a breach of the statutory warranties.
Resolution of Building Disputes
The changes include broadening the rectification orders that can be made by the relevant tribunal to allow for staged rectification with deadlines by which specified works are to be completed. Builders are able in certain circumstances to apply to have these deadlines extended.
The amendments require courts and tribunals to have regard to having the party responsible for the defective work carry out rectification of the defective work.
If the fault lies with a sub-contractor, that contractor should attend to the rectification, rather than it being the responsibility of the builder.
This article is for general information only and is not intended as legal advice. If you need specific help, please contact our office.
