This article recaps a recent webinar held on 10 October, 2024, focusing on building defect claims process, the DBPA 2020 and relevant legislation in New South Wales. The webinar, hosted by Nikki Jovicic from LookUpStrata, featured David Bannerman, Principal of Bannermans Lawyers, as the presenter.
Update on the latest issues in strata building defects claims
Key Concepts and Recent Developments on the Building Defect Claims Process
- Defect Definition and Categories: A building defect is defined as anything causing a loss related to building work. Defects are categorised as either major or minor. Major defects have severe consequences like safety hazards, structural issues, and waterproofing failures that could lead to a building’s collapse or destruction. Minor defects encompass all other defects that don’t fit this definition.
- Statutory Warranties and Time Limits: In NSW, owners have two years from the completion of work to claim for all defects (major and minor) against the builder or developer. However, the timeframe for major defect claims extends to six years. The webinar emphasises the importance of acting within these timeframes, as failure to do so could absolve the responsible parties of liability under the statutory warranty scheme.
- Determining the Warranty Period: Accurately determining the warranty period is crucial. For new buildings, the warranty period starts from the date of the first valid occupation certificate (either interim or final, depending on the specific situation). For retrofitted buildings or remedial works, the warranty period commences when the work becomes reasonably usable, which could be indicated by factors like occupation, a certificate of practical completion, or a builder’s declaration.
- Home Building Insurance: This insurance applies to buildings with three or fewer stories and provides valuable protection for owners, offering coverage of $340,000 per lot. As part of the building defect claims process, owners must notify their insurer within six months of becoming aware of a defect to claim under this scheme.
- Statutory Warranties and Time Limits: In NSW, owners have two years from the completion of work to claim for all defects (major and minor) against the builder or developer. However, the timeframe for major defect claims extends to six years. The webinar emphasises the importance of acting within these timeframes, as failure to do so could absolve the responsible parties of liability under the statutory warranty scheme.
- 2% (Now 3%) Bond Scheme: Introduced in NSW to protect against builder insolvency, this scheme requires developers to lodge a bond (2% of the contract price, increasing to 3% from July 2023) with Fair Trading.
- Cladding Class Action: A significant class action lawsuit against Luca Bond and Vitrobond cladding manufacturers is currently underway in Australia. Notably, strata schemes with these types of cladding are automatically included in this lawsuit, regardless of whether they opted in previously. This presents an opportunity for owners corporations to potentially recover costs associated with cladding replacement.
- Project Remediate: This NSW initiative provides interest-free loans to owners corporations for replacing unsafe cladding. While the uptake has been limited due to market competition, owners corporations that replaced cladding before June 30, 2021, and meet specific criteria, can apply for reimbursement of the interest they would have incurred on the loan. Owners corporation should be aware that this option comes with some risk.
Design and Building Practitioners Act 2020 (DBPA)
The webinar highlighted the DBPA, which came into effect in June 2020, as a crucial legal framework in NSW. This Act introduces a duty of care that extends beyond statutory warranties and applies to all classes of building work.
Key implications of the DBPA:
- Wider Scope of Liability: The DBPA holds all parties in the supply chain responsible for defects, except the certifier. This means claims can be brought against suppliers, engineers, architects, builders, developers, and subcontractors.
- Personal Liability for Directors: The Act allows for claims to be made against individuals who had “substantial control” of the building work, such as company directors or supervisors, even if the company is insolvent. This provision, known as “piercing the corporate veil,” is a significant step in holding individuals accountable.
- Higher Pleading Standard: Claims under the DBPA require a higher level of detail in legal pleadings, including specifying the risks the builder should have managed and the precautions they should have taken. Failure to meet this standard could result in the claim being struck out.
- Evolving Case Law: The interpretation of the DBPA is still developing through court decisions. Several key cases have provided some clarity, but the law remains in its early stages, and further legal precedents are expected.
Addressing Building Defects: Practical Steps
The webinar outlined a practical building defect claims process:
- Initial Steps: Start with an informal complaint to the Office of Fair Trading, which can trigger a preliminary investigation. While this step may not always resolve the issue, it can serve as a starting point.
- Filing a Claim: If informal resolution fails or time constraints are an issue, file a claim with the NSW Civil and Administrative Tribunal (NCAT) or the Supreme Court. The choice of venue depends on the specifics of the case and the desired outcome.
- Gathering Evidence: Obtaining comprehensive expert reports is critical to support the claim. Reports should detail the defects, proposed rectification works, and associated costs.
- Settlement Discussions: Encourage settlement discussions at various stages, particularly after the exchange of expert reports. Settlement agreements should address key aspects like the scope of works, responsible parties, timeframes, and costs.
- Hearing and Decision: If settlement fails, the case will proceed to a final hearing where the tribunal or court will issue a binding decision. This decision may involve a monetary award or a rectification order.
- Enforcement: If the responsible party fails to comply with the decision, options include claiming under home building insurance (if applicable) or taking further legal action to enforce the debt.
Q&As Covered During the Webinar
The webinar concluded with a Q&A session. Some key questions addressed included:
- Engineer Oversight for Remediation Works: A question was raised about the mandatory nature of engineer involvement in overseeing waterproofing repairs. David Bannerman clarified that while a registered building practitioner is necessary, there is no mandatory requirement for a designer-construct contract where the engineer oversees every stage of the work. However, the design and execution must still comply with the DBPA.
- Dealing with Persistent Water Ingress: Another question concerned ongoing water ingress issues despite repeated repair attempts. David Bannerman emphasised the importance of notifying the home building insurer within the stipulated timeframe. He also advised lot owners facing financial losses due to ongoing defects to explore their rights under strata legislation (specifically Section 106 of the Strata Schemes Management Act 2015), which allows for compensation from the owners corporation for losses like rent and property damage.
Links to resources mentioned during the webinar
- Building Defects: Who pays?
- A history of the cases exploring the duty of care under the Design & Building Practitioners Act 2020
- Builder gone bust? Making the most of the Home Warranty Insurance?
- A Comprehensive Guide to the Design and Building Practitioners Act 2020 – Regulation Update
- Claims by Owners for Damages caused by Water Ingress under S106(5)
- The Issue with Planter Boxes
- Building Defects Guide Part 1
- Building Defects Guide Part 2
- Are you entitled to an Alucobond payout?
This webinar offered valuable insights into the complex landscape of building defect claims process in NSW. The information shared emphasised the importance of understanding legal rights, acting promptly, and seeking expert advice to navigate the process effectively.
Presenters
David Bannerman Bannermans Lawyers E: enquiries@bannermans.com.au P: 02 9929 0226
Article author: The Lookupstrata Team
This post appears in Strata News #716.
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