Insights

In January 2015, the statutory warranties contained in section 18E of the Home Building Act (NSW) 1989 (Act) were amended to redefine the nature of a defect and increased the scope of what is considered a “major defect” to include serious problems which affect habitability and the use of the building and to the buildings’ potential destruction.

Section 18E now provides that builders must provide a warranty for residential building works for a period of 6 years in respect of a “major defect” and a period of 2 years in respect of any other defect.

Whilst there has been very little judicial consideration of the definition of “major defect” by the NSW Courts since the amendment, two recent decisions by the NCAT Appeal Panel have considered what constitutes a “major defect” and what evidence is required in order to prove its existence.

Vella v Mir [2019] NSWCATAP 28

The Appeal Panel’s decision in Vella v Mir provides a useful a guideline as to the sequence of analysis required when assessing a warranty claim under s 18E of the Act. The sequence of analysis discussed is as follows:

  1. When does the statutory warranty period commence?
  2. Has a statutory warranty been previously enforced?
  3. Are the claimed defects part of a major element of the building?
  4. If the answer is yes, are the claimed defects in a major element of a major defect?
  5. Has an application been made within the relevant limitation period?

Ashton v Stevenson [2019] NSWCATAP 67

This case, similar to the one discussed above, focused on the definition of a “major defect” under section 18E of the Act and also highlighted the importance of the 2014 amendments to the Act.

This case referred to the analysis discussed in Vella v Mir and further noted that:

  1. The consequences of a major defect must be shown to have, or to probably have, a proven consequence for the habitation or use of the building or to the integrity of the building.
  2. Subsection 18E(4)(a)(i) requires there to be a proven, or probable, inability to inhabit or use the building. Under this subsection, it must be proven that the defect causes more than a mere inconvenience and concrete evidence must be provided to illustrate the actual impact of the defect to the building.
  3. The evidence adduced to prove this impact should be on factual basis rather than a subjective one in order to be considered successfully.

Conclusively, the Appeal Panel found that a number of defects in this case did not constitute major defects as they did not satisfy the elements set out in section 18E(4) of the Act, being the inability to inhabit, destruction or collapse of part or all of the building. This included a rainwater entry from a balcony floor. Although this was found to be a major element of waterproofing, it failed to be considered as a major defect because it did not satisfy the elements in section 18E(4) of the Act.

Conclusion

Before commencing a claim in the Courts or Tribunals, it is imperative to determine whether a major or minor defect exists and, if so, the length of warranty that applies, when the warranty period commences and whether concrete evidence can be provided to support the existence of the defect.

If you need legal advice on statutory warranties, want to know more about home warranty claims, or just need to speak to an expert in building and construction law, call us today on +61 2 4221 9311.

This article was co-authored by Law Cadet, Amy Ong.

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