Thursday, 25th April 2019

register | forgot password?

Grace Lawyers - Industry Update

Thursday, 29th March 2012

Can an owners corporation always sue a builder for a breach of the Statutory Warranties under Part 2C of the Home Building Act, 1989 (“The Act”)? Following the decision in Ace Woollahra Pty Ltd v. The Owners – Strata Plan No. 61424 & Anor [2010] NSWCA 101 handed down on 17 May 2010, the answer is now far from clear.

In Ace, the owners corporation of a building comprising aged persons’ units took legal action against a builder alleging a breach of the Statutory Warranties by the builder (the action was undertaken by the Building Insurers’ Guarantee Corporation). It was not disputed that the previous registered proprietor of the land had entered into a Joint Venture Agreement with another company. That other company entered into a building contract with the builder. The previous registered proprietor was not named as a party in the building contract for the construction of the aged persons’ units.

This fact was critical.

The Law

The Court referred to section 18D of the Act. Section 18D provides that successors in title are entitled to the same rights as the person’s predecessor in title in respect of a statutory warranty. The builder said that section 18D of the Act didn’t apply because the previous registered owner was not entitled to the benefit of a statutory warranty (because the builder didn’t have a contract with the owner of the land). The owners corporation said that the Home Owners Warranty (“HOW”) Insurance provisions in the Act should apply to the arrangement and the previous registered owner, based on policy considerations, must have been a person entitled to the benefit of a statutory warranty.

The decision

The Court agreed with the builder. The owners corporation could only rely upon section 18D to sue the builder if the previous registered owner was entitled to the benefit of the Statutory Warranties. Because the previous registered owner didn’t have a contract with the builder (the joint venture partner did) then he was not entitled to the benefit of the Statutory Warranties. The owners corporation’s claim against the builder was dismissed.

The Court also considered the provisions concerning HOW Insurance. The builder had obtained HOW Insurance. The Court concluded (perhaps erroneously) that the previous registered proprietor (as a developer) was required to obtain HOW Insurance instead.

What does it mean?

The decision highlights the critical need for an owners corporation to investigate the relationship between the builder and the previous registered owner to determine the existence of a contractual relationship. Until such time as it is established that the previous registered proprietor was entitled to the benefit of the Statutory Warranties (often a very difficult task), an owners corporation (like the owners corporation in Ace) is at risk by commencing proceedings.

The decision has serious ramifications for HOW Insurance. HOW Insurers are now likely to insist that owners corporations provide a copy of the building contract. In view of the involvement of the Building Insurers’ Guarantee Corporation, we believe that changes will be made to the Act. However, many current claims against builders are at risk of being defeated and should be reviewed immediately to see if this case applies.

If you require advice about your particular circumstances or claim, please contact David Andrews on (02) 9284 2700 or by email [email protected].

Bookmark and Share

Comment from aieroel on Saturday, 23rd May 2015

"Thanks Market Thailand - Market Indonesia

Search for services

Find tradesman or property services in your local area.

Search for services