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Insights

Owner builders, those undertaking residential building works and homeowners having work undertaken should ensure they are familiar with these changes and the overall impact of the home building legislation.

Key changes include:

Warranties under the Act
A warranty under the Act requires work to be performed in a proper and workmanlike manner. This warranty has changed to require work to be performed with due care and skill.

Structural defects are provided a 6 year limitation period for claims. This 6 year limitation period has changed to apply to a “major defect” in a major element of a building or such other defects to be identified in regulations.

A major element of a building is defined as an internal or external load bearing component, a fire safety system, waterproofing or such other element identified by regulations.

This amendment may be an improved outcome for homeowners. It has increased the scope for claims to be made for defects that are significant but not necessarily structural.

Homeowners to mitigate loss
The amendments to the Act introduce positive obligations on home owners where there has been a breach of statutory warranties. These obligations require home owners to:

• take action to ensure that the loss arising from the breach of warranty is minimised;

• give notice of a breach of statutory warranty to the builder within 6 months of the breach becoming apparent;

• allow the builder reasonable access to the affected area to rectify the breach.

If a home owner fails to comply with these obligations, this may be taken into account by a Court or Tribunal in any subsequent claim. It must be taken into account if it involves a failure to provide reasonable access.

Defence to claim for breach of warranty
Under the Act if the builder has advised in writing that the work should not proceed in the manner directed by the homeowner however the homeowner requires the work to be done regardless, there is a defence available to the builder if the work is defective.

This has been extended so that a builder also has a defence if they undertake work in reasonable reliance on a professional, such as an architect, engineer or surveyor, engaged by the homeowner and independent of the builder.

Owner builders
Owner builders are no longer required to obtain home owners warranty insurance when the amendments commence. The name of the insurance has changed to “insurance under the Home Building Compensation Fund”. It will still need to be taken out by contractors performing work under a contract with an owner builder.

Where there has been work under an owner-builder permit and a sale of the property is proposed within the next 7 years and 6 months a prescribed warning is required in the contract for sale. If this warning is not included the purchaser may withdraw from the contract without penalty.

Contract changes
There are also a number of changes to the prescribed requirements for residential building contracts. These include changes to:

• progress payment provisions;

• statements regarding termination rights;

• caps on deposits; and

• warranties under the contract.

What you need to do?
This is only a summary of selected changes to the Act.

If you are in the construction industry you should carefully review all changes to the Act and ensure you are in compliance.

Homeowners and owner builders should also bear in mind the impact of the changes in respect of any residential building work undertaken on their property.