Is it Curtains for your Building Claim?
By Peter Micevski, Lawyer, Lovegrove Smith & Cotton
February 2014
For lay people not in tune with legal jargon, the terms ‘limitation’ and ‘time bar’ can be quite puzzling and confusing. Put simply, ‘limitation’ or ‘time bar’ refers to the maximum time after an event that legal proceedings based on that event may be initiated.
Just like most other civil claims, limitations and time bars are relevant to building claims. Despite the raft of time bars and limitations, it is commonplace for claims relating to building issues to manifest many years after the building is occupied.
The time bars relevant to building claims depend heavily upon:
whether the builder is alive, solvent and traceable; and
when the works started and completed.
Who to sue? When to sue?
As long as the builder is alive, solvent and traceable, a person must seek redress for defects attributable to the builder and all consequential damage, directly from the builder.
In New South Wales, section 109ZK of the Environmental Planning and Assessment Act 1979 (NSW)(“the Act”), provides that a building action may not be brought more than 10 years:
- after the date on which the final occupation certificate has been issued; or
- if no occupation certificate has been issued, the last date the building was inspected by a certifying authority; or
- if no such inspection has been conducted, the date on which the part of the building, where the building work was carried out, was first occupied or used.
However, the 10-year limitation period only applies to building work commenced after 1 August 2008. For works commenced before that date and which there is an occupation certificate, the 10 year limitation also applies.
However, for works commenced before that date and which there is no occupation certificate issued, building claims which are based on breach of a duty of care are subject to a six year limitation period under the Limitations Act 1969 (NSW).
Importantly, the six-year period does not commence to run until the defect becomes apparent. Noting that a fundamental defect may take years or even decades to reveal itself, in theory, a building action for works commenced before 1 August 2008 and which no occupation certificate has been issued can be initiated many years after the building was built.
If the Builder is no longer alive, solvent and traceable, the only redress for a person for defective building works is under home warranty insurance.
The Home Building Act 1989 (NSW) limits home warranty insurance indemnity to 2 years for non-structural and 6 years for structural issues after the final occupation certificate has been issued.
What does this mean to you?
Building owners should act on the basis that they have 10 years to sue for building defects from the date of issue of the occupation certificate.
Building owners should be aware of the date of issue of the occupation certificate in respect of their building and ensure they bring a building action immediately when defects are discovered. Waiting too long can be costly.
We recently acted for a building owner who brought a building action to our attention 5 years after defects with respect to their building were discovered. Unfortunately, by that time, the curtain was drawn and the 10 year limitation period in the Act following completion had expired. There was no round of applause and sadly, the building owner was shut out from bringing a building action before the Court. The devastating consequences of the owner’s inaction was loss and damage of a significant sum of money.
By Peter Micevski, Lawyer
Lovegrove Smith & Cotton
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© Lovegrove Solicitor’s 2014
