Changes to the NSW Home Building Act Statutory Warranties Scheme
The Home Building Amendment Act 2014 was passed by the NSW Parliament on 28 May 2014. The Act contains numerous amendments to the Home Building Act 1989 (“HBA”). NSW Fair Trading has announced that the changes to the HBA in relation to the statutory warranties scheme will commence from 15 January 2015. As well, new regulations (the Home Building Act Regulations 2014) have been proposed and are expected to commence at the same time as the amendments to the HBA.
The amendments to the HBA will abolish the current distinction between structural and non-structural defects. Of particular significance is the introduction of the concept of a “major defect”. Under the amendments, a “major defect” would require a building to be uninhabitable or under threat of collapse. The six year statutory warranty period will only apply in the case of “major defects”. For all other defects, the statutory warranty period will be limited to two years.
A “major defect” is defined as follows:
(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 (or part of the building) for its intended purpose, or
(ii) the destruction of the building or any part of the building, or
(iii) a threat of collapse of the building or any part of the building, or
(b) a defect of a kind that is prescribed by the regulations as a major defect.
A “major element of a building” is defined as:
(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 the amendments to the HBA currently stand, the definition of a “major defect” will omit serious structural defects such as defective waterproofing and fire safety issues that do not render the building (or part thereof) uninhabitable or threaten its collapse.
The statutory warranty period provided under the HBA begins to run from the date on which the works are completed. The amendments provide that the date from when the statutory warranty period begins to run in respect of strata schemes is the date on which an occupation certificate is issued, authorising the use and occupation of the entire building. The date of completion will generally be the date of issue of the occupation certificate.
The defences available to a builder for a breach of the statutory warranties contained in the HBA will be broadened under the amendments to the HBA. A builder may be able to defend a claim for a breach of a statutory warranty on the basis that the defects arise from their reasonable reliance on written instructions from an independent professional (for example, an architect or an engineer) acting for the party who contracted the work.
NSW Fair Trading has announced that the changes to the HBA will commence from 15 January 2015, however the proposed changes to the HBA will not apply to claims where proceedings have been commenced before the date the changes commence.
The information contained in this article is not to be taken as legal advice. Please contact us if you require specific information or advice.