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Residential Focus

25 September 2019

#Property & Real Estate

Christine Jones

Published by Christine Jones, Divya Chaddha

Residential Focus

Builder claims an owners corporation commenced breach of statutory warranties proceedings out of time – when does completion occur?

In the recent decision of Dyldam Developments Pty Ltd v The Owners – Strata Plan No 85305, the Appeal Panel considered whether an owners corporation had commenced proceedings outside the limitation period specified in section 18E of the Home Building Act 1989 (HB Act). In the case, the owners corporation would be barred from enforcing a statutory warranty under the HB Act.

The facts

Dyldam Developments Pty Ltd (Dyldam) carried out the construction of a three storey residential building (Development) between 2010 and 2011. On 5 and 9 September 2011, two interim occupation certification (Interim OCs) were issued by a certifier engaged by Dyldam with respect to the Development. The Interim OCs permitted the occupation of the ‘whole’ of the building, however identified that they excluded certification of various conditions required under the development consent, for instance for the on-site stormwater detention system to be registered on title. The certifier issued a final occupation certificate (Final OC) on 12 October 2011, which did not identify any excluded conditions.

The owners corporation commenced proceedings against Dyldam for breach of the statutory warranties under the HB Act on 4 October 2018.

The relevant limitation period

The relevant limitation period is contained in s 18E of the HB Act, which required, as it was before February 2012, that proceedings for breach of statutory warranty be commenced within seven years after, relevantly: “the completion of the work to which it relates”. The meaning of “completion of the work” is found in s 3C(2) of the HB Act, which in such circumstances provides that completion occurs on “the date of issue of an occupation certificate that authorises the occupation and use of the whole of the building.”

In that regard, Dyldam alleged that the owners commenced proceedings out of time on 4 October 2018 as the Interims OCs were issued in September 2011, thereby beyond seven years ago, and had authorised occupation of the whole of the Development.

The decision of the Tribunal

The Tribunal disagreed with Dyldam’s allegations.

In particular, the Tribunal construed section 3C(2) as requiring an occupation certificate that is validly issued under the Environmental Planning and Assessment Act 1979 (EP&A Act). In that regard, the Tribunal held that the Interims OCs had not been validly issued by the certifier pursuant to section 109H(2) of the EP&A Act as they both identified mandatory conditions of the development consent that had not yet been satisfied.

On that basis, the Tribunal held that the Development the subject of the proceedings was completed on 12 October 2011, being the date of the Final OC, and the proceedings commenced by the owners corporation were in time.

The Appeal

Dyldam sought to appeal the decision of the Tribunal. Dyldam alleged that the Tribunal had made an error in finding that the reference to ‘occupation certificate’ in section 3C(2) of the HB Act does not apply to the Interim OCs on the basis they were issued in breach of section 109H(2) of the EP&A Act and therefore not validly issued. Dyldam also submitted that section 3C(2) of the HB Act should be understood as referring to any occupation certificate that, on its face, authorises occupation of the whole of the building.

The Appeal Panel notwithstanding maintained the decision of the Tribunal and held that neither of the Interim OCs had been validly issued, and as a consequence, the reference to “occupation certificate” in section 3C(2) of the HB Act did not apply to the Interim OCs.

New amendments to the EP&A Act

The Interim OCs in this case were issued under the legislation as in effect in 2011.

Significant amendments to the EP&A Act are due to take effect from September 2019 with respect to the issuing of an occupation certificate. In the amended provisions, the restriction remains on the issuing of an occupation certificate unless all preconditions to the issue of the certificate that are specified in a development consent have been complied with according to s 6.10(1). However, there is no equivalent of s 109M(1) and s 6.4(c) now provides that when issued, an occupation certificate is taken to be part of the development consent to which it relates. Further, there is no longer a distinction between an “interim” and a “final” occupation certificate. 

In that regard, there is more certainty under the new regime that ‘completion of work’ for the purposes of s 3C(2) of the HB Act would accrue from date of the Final OC. As such, in certain circumstances, the new regime could have the effect of extending the warranty periods owed by builders and developers under the HB Act.

Authors: Christine Jones & Divya Chaddha 

In the media

Stable population growth will support building activity
Stable population growth is a welcome development for the residential building industry as it will support the industry as it recalibrates to a new equilibrium level, states the HIA’s Economist (19 September 2019).  More...

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The National Construction Code is often referred to in various contexts by those in the building and construction industry and outside. This article seeks to provide a primer or summary of the main reasons for and effects of the Code (13 September 2019).  More... 

Feedback sought on mandatory requirements for performance solutions
Mandatory requirements for the development of performance solutions could be inserted into the National Construction Code under proposals currently under consideration to improve the accountability surrounding performance requirement processes and accountability (13 September 2019).  More... 

First home buyer deposit scheme moves ahead
HIA welcomes the Government’s introduction of the National Housing Finance and Investment Corporation Bill providing a platform to establish the First Home Loan Deposit Scheme announced during this year’s Federal election (13 September 2019).   More... 

Product Recall: 4mm toughened glass 9th September
The ACCC have issued an alert related to a recall of 4mm toughened safety glass distributed everywhere in Australia other than Western Australia and the Northern Territory (10 September 2019).  More... 

First home buyers surge
First home buyers are continuing to take advantage of aless competitive environment land more affordable house prices. The number of loans to first home buyers was up by 1.3 per cent for the month and 4.0 per cent for the three months to July, according to the HIA (09 September 2019).  More... 

Bamboo lights a fire under Australian construction industry
Bamboo is fast becoming a popular choice in Australia for flooring and furniture, but Mr Gutierrez said global construction industries could be transformed if building regulations incorporated bamboo as a structural building material option (09 September 2019).  More...

New EPA guides to help the construction industry properly dispose of waste
The NSW Environment Protection Authority (EPA) has published two new guidance documents to help the construction and demolition industry strengthen their procurement and contract processes around waste disposal (17 September 2019).  More... 

In practice and courts

ABCB: Let us know your views on the development of performance solutions!
Complete our online survey to have your say (12 September 2019).  More... 

New Australian Standards

CER: Public consultation open for changes to solar postcode zones
The Clean Energy Regulator is proposing updates to postcode zones for small-scale technologies under the Small-scale Renewable Energy Scheme. The changes will affect the number of small-scale technology certificates for eligible systems in certain postcodes. If agreed, the changes will come into effect from 1 October 2019.  More... 

GBCA important deadlines - Green Star certification for your project
Many project teams have timelines set around major events. To support this, these guidelines below (based on typical time frames), which specify the deadlines you’ll need to meet in order to have your project certified in time for key milestones in 2019. Deadlines are from 08 April – 04 November 2019.  More... 

NSW Fair Trading: Security of Payment laws start soon
The Building and Construction Industry Security of Payment Amendment Act 2018 and the Building and Construction Industry Security of Payment Amendment Regulation 2019 will commence on 21 October 2019.  More... 

BPB releases summary of key audit findings for 2019
The Building Professionals Board has released a summary of key findings so far from its 2019 program of certifier audits. Read more about the audit program, including the objectives and summary of findings. As audits continue, more findings will be added (August 2019).  

NSW Fair Trading: Part 6 of the EP&A Act postponed until 1 December 2019
The Part 6 provisions of the Environmental Planning and Assessment Act have been postponed and will now start on 1 December 2019. This delay will allow time for the sector to adjust to the regulatory changes that have been progressing around fire safety and the Building and Development Certifiers Act 2018.  More... 

Planning Circular – Commencement of Part 6 (building and subdivision certification provisions)
FAQ - Occupation certificate
FAQ - New mandatory compliance powers for private principal certifiers
FAQ - New subdivision works certificate
Environmental Planning and Assessment Act 1979
Environmental Planning and Assessment Regulation 2000
If you have any queries, please contact the Department of Planning, Industry and Environment via email.  More... 

Cases

Dyldam Developments Pty Ltd v The Owners – Strata Plan No 85305 [2019] NSWCATAP 229
HOME BUILDING – Time to commence proceedings – consideration of interim and final occupation certificates – collateral review.
Building Professionals Act 2005 (NSW); Building Professionals Regulation 2007; Civil and Administrative Tribunal Act 2013 (NSW); Charter of Rights and Responsibilities Act 2006 (Vic); Conveyancing Act 1919 (NSW); Interpretation Act 1987 (NSW); Environmental Planning and Assessment Act 1979 (NSW); Environmental Planning and Assessment Amendment Act 2017(NSW); Environmental Planning and Assessment Regulation 2000; Home Building Act 1989 (NSW); Home Building Amendment Act 2011 (NSW); Home Building Amendment Act 2014 (NSW).

Noureddine v Barbalace Construction Pty Ltd [2019] NSWCATAP 223
APPEAL - Costs – Successful party – Exercise of discretion.

Elias v McGauley [2019] NSWCATAP 237
APPEALS - Civil procedure - Extension of time for appeal - Service of documents on corporation- procedural fairness--
APPEALS - Building and Construction - Rectification of defective building work - Damages - Sale of property without rectification - Effect on assessment of damages.

Nationwide Builders Pty Ltd v Le Roy [2019] NSWCATAP 220     
HOME BUILDING – rectification and completion costs – damages for late completion
DISCRETION – order making power under s 48O of Home Building Act – application of preferred outcome principle.

DB Homes Australia Pty Limited v Kes [2019] NSWCATAP 221
APPEALS - Building and Construction – Contract – Repudiation - Adequacy of findings.

Stefanis v Oneview Construction Pty Limited [2019] NSWCATAP 218
APPEAL – Expert evidence - Section 18F defence – Leave to appeal.

Legislation

Regulation

Work Health and Safety Exemption (Construction Induction Training Card - Workers) 2019
18/09/2019 - This instrument exempts workers on overseas construction work within the responsibility of the Department of Foreign Affairs and Trade from the requirement to keep a general construction induction training card available for inspection.

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Christine Jones

Published by Christine Jones, Divya Chaddha

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