A Strata Guide to Statutory Warranties Under the NSW Home Building Act 1989

Introduction

Statutory warranties under the Home Building Act 1989 (NSW) are a crucial safeguard for anyone involved in strata property construction or ownership. These warranties automatically apply to all residential building contracts, ensuring that strata owners, developers, and Owners Corporations have clear legal protections—often requiring specialist advice for an Owners Corporation—against building defects and non-compliance

Understanding how these warranties work is essential for protecting investments in strata properties and managing the responsibilities of builders and developers. This guide explains the key statutory warranties, who can claim, and why knowing your rights and obligations under the Home Building Act 1989 (NSW) matters for every strata stakeholder.

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What Are the Six Statutory Warranties for Strata Properties

Warranty for Workmanship According to Plans & Specifications

Under Section 18B(1)(a) of the Home Building Act 1989 (NSW), builders are required to perform all work with due care and skill. This means the work must be carried out in a proper and workmanlike manner, adhering to the plans and specifications detailed in the building contract.

The standard for what is considered “proper and workmanlike” is often assessed on a case-by-case basis. Furthermore, all construction must align with the agreed-upon plans. If a builder finds that the plans conflict with the Building Code of Australia, they must:

• Seek written instructions from the owner or their representative before proceeding
• Ensure that failure to adhere to the plans or the Building Code of Australia does not occur, as this constitutes a breach of this warranty

Warranty for Suitable & New Materials

This statutory warranty, outlined in Section 18B(1)(b) of the Home Building Act 1989 (NSW), places two key obligations on builders regarding materials used in a strata project:

• All materials supplied must be good and suitable for the specific purpose for which they are used. This requires the builder to consider any specific intentions communicated by the owner that might affect material selection.
• Unless the contract explicitly states otherwise, all materials used must be new. This ensures that strata properties are not constructed with used or defective materials, safeguarding the quality and longevity of the building.

Warranty for Compliance with Applicable Laws

A critical warranty for any residential building work, including strata developments, is the requirement for all work to be done in accordance with the law, as mandated by Section 18B(1)(c) of the Home Building Act 1989 (NSW). This means the builder must comply with all relevant legislation and standards, including:

• The Home Building Act 1989 (NSW)
• The Building Code of Australia
• Any other applicable law or code relevant to the construction

Warranty for Diligent & Timely Completion

As per Section 18B(1)(d) of the Home Building Act 1989 (NSW), builders must carry out their work with due diligence and complete it within the timeframe specified in the contract.

If the contract does not stipulate a completion date, the law implies that the work must be finished within a reasonable time. This warranty protects strata owners and developers from unnecessary or prolonged delays in their building projects. Contractual clauses for extensions of time may also apply to this warranty.

Warranty for Reasonable Fitness for Occupation

When the work involves constructing a new dwelling or making alterations or additions, it must result in a dwelling that is reasonably fit for occupation, according to Section 18B(1)(e) of the Home Building Act 1989 (NSW).

This is a particularly important warranty for strata schemes, as it ensures that newly completed apartments and common areas are habitable. Typically, the issuance of an occupation certificate for the building is considered evidence that this warranty has been met.

Warranty for Fitness for a Specified Purpose

This warranty, found in Section 18B(1)(f) of the Home Building Act 1989 (NSW), applies when an owner expressly informs the builder of a specific purpose or result they want to achieve with the work, indicating their reliance on the builder’s skill and judgment.

In such cases, both the work performed and the materials used must be reasonably fit for that specified purpose. For instance, if an owners corporation requests waterproofing for a common property area intended for heavy foot traffic, the materials and workmanship must be suitable for that specific, stated use.

Understanding the Warranty Periods for Strata Building Defects

The Six-Year Warranty Period for Major Defects

Under the Home Building Act 1989 (NSW), a six-year warranty period applies to any work found to have a major defect. This timeframe offers long-term protection for significant issues that could compromise a strata building’s safety and integrity.

Proceedings for a breach of statutory warranty relating to a major defect must therefore begin within this six-year window.

Examples of what constitutes a major defect include:

• A defect in a major building element that affects the structural integrity of the building.
• An issue that poses a risk of the building collapsing or creates a safety hazard for occupants.
• A defect in a key building system, such as waterproofing or fire safety systems, that prevents it from functioning as intended.
• Any problem that renders the building, or a part of it, unfit for occupation.

The Two-Year Warranty Period for All Other Defects

For defects that are not classified as “major,” a shorter two-year warranty period applies. This category generally covers issues that are cosmetic or superficial and do not affect habitability or structural soundness.

If a defect—major or non-major—emerges within the final six months of its warranty period, the owner gains an additional six months from discovery to commence legal proceedings.

Determining the Start Date of the Warranty Period for Strata Schemes

The commencement date of the warranty period is critical for strata schemes. Both the six-year and two-year periods begin on the date the occupation certificate is issued for the entire building, authorising its use and occupation.

This distinction means the warranty clock does not start when individual lots or stages are finished. Instead, completion of the whole strata building is tied to the final occupation certificate, ensuring all owners share the same warranty timeframe.

Who Can Claim & Who Is Liable for Strata Defects

Rights of Strata Owners & Successors in Title

The statutory warranties provided under the Home Building Act 1989 (NSW) are not limited to the original party who contracted for the residential building work. These protections automatically extend to subsequent owners of the property, who are legally referred to as “successors in title.”

This is particularly important in a strata context. If a defect becomes apparent after a lot is sold, the new owner has the same right to make a claim against the original builder or developer.

According to Sections 18C and 18D of the Act, both:

• Individual lot owners
• The Owners Corporation

can enforce these warranties for defects in a strata building.

Builder & Developer Liability for Breaching Statutory Warranties

Both builders and developers are legally responsible for rectifying defective work that breaches the statutory warranties. Builders are directly liable for the work they perform.

However, amendments made to the Home Building Act 1989 (NSW) in 2011 solidified the liability of developers as well. Under these changes:er fails to rectify the defects after being notified, the next step is to co

• A developer on whose behalf residential building work was done is also deemed to have given the statutory warranties to the owner and any successors in title.
• This means a developer can be held liable for defects, even if they were not a party to the building contract.

This creates a significant exposure for developers, who may need legal advice on strata property development, particularly in situations where the builder has become insolvent, disappeared, or died.

Case Study on Developer Liability: The Owners SP 66375 v King

The case of The Owners – Strata Plan No 66375 v King [2018] NSWCA 170 provides a clear example of a developer’s liability. In this instance, the builder went into liquidation, and the Owners Corporation of a strata scheme pursued the developers, Mr and Ms King, directly for building defects.

The NSW Court of Appeal found that the Kings met the definition of “developers” under the Home Building Act 1989 (NSW). As a result, they were held liable for breaches of the statutory warranties and ordered to pay the Owners Corporation damages totalling $5,093,168.08.

This case highlights the substantial financial risk developers carry for defective work in strata projects.

The Process for Making a Strata Statutory Warranty Claim

Notifying the Builder & Mitigating Your Loss

If a strata owner or Owners Corporation discovers a defect, they have an obligation to mitigate their loss. This means taking reasonable steps as soon as possible to minimise the impact of the defect and prevent the damage from worsening.

A crucial first step in this process is to formally notify the builder of the issue. The law requires that the builder be notified in writing of the breach of warranty, and this notification should be provided within six months of the defect becoming apparent.

Failing to meet this timeframe could be raised by the builder in a tribunal or court to argue for a reduction in their liability. Earlier notification might have lessened the extent of the damage and the cost of rectification.

Allowing Access for Rectification Work

After notifying the builder, strata owners and the Owners Corporation must provide the builder with reasonable access to the property. This access allows the builder to inspect the alleged defects and, if they are responsible, carry out the necessary rectification work at their own expense.

An owner cannot unreasonably refuse the builder access to the property for these purposes. Doing so can negatively impact a future claim. Granting access is a key obligation and demonstrates that the owner has provided the builder with a fair opportunity to resolve the issue before escalating the matter.

Gathering Evidence & Commencing Legal Proceedings

To support a statutory warranty claim, it is essential to compile thorough evidence. Strong documentation is critical if the matter becomes a strata dispute in NCAT or court.

Key evidence to collect includes:

• Expert Reports: An independent building expert can assess the defects and provide a formal report identifying the issues and their cause.
• Photographs and Videos: Clear visual evidence of the defective work can effectively demonstrate the problems.
• Contracts and Documents: The original building contract and any related specifications outline the agreed-upon scope of work.
• Written Correspondence: Maintain a complete record of all communications with the builder, including emails, letters, and notes from conversations.

If the builder fails to rectify the defects after being notified, the next step is to contact the Building Commission NSW for assistance with dispute resolution. Should this fail, legal proceedings can be commenced in the appropriate court or tribunal, but this must be done within the statutory warranty period.

Understanding Potential Defences for Builders

Defences Based on Owner Instructions & Professional Advice

While statutory warranties provide robust protection for strata owners, Section 18F of the Home Building Act 1989 (NSW) outlines specific circumstances where a builder may have a valid defence against a warranty claim. These defences apply if the builder can prove that a defect was caused by factors outside their control.

A builder is not liable for a breach of warranty if the defect resulted from:

• Instructions from the owner that were contrary to the builder’s written advice, provided the builder warned the owner in writing about the risks.
• Reliance on a professional’s instructions where the builder reasonably followed written directions from an independent architect or engineer acting for the owner (and not referred by the builder).

Why Statutory Warranties Cannot Be Excluded from a Contract

Under Section 18G of the Home Building Act 1989 (NSW), statutory warranties cannot be excluded, restricted, or modified by any building contract, a key consideration when drafting construction contracts. Any clause attempting to waive or limit these warranties is void and unenforceable.

In practice, this means:

• Owners retain the fundamental protections of the warranties throughout the statutory period.
• Builders gain the right not to be sued for defects once that statutory period ends; the case of Onslow v Cullen [2022] NSWSC 1257 confirms that merely restating the warranties in a contract does not alter their statutory nature or extend claim timeframes.

Conclusion

Understanding the statutory warranties under the Home Building Act 1989 (NSW) is essential for protecting strata property investments and clarifying the obligations of builders and developers. These automatic guarantees cover everything from workmanship and materials to legal compliance, with specific timeframes and clear processes for making a claim.

If you are facing a dispute over a breach of statutory warranty, it is crucial to seek advice from the strata defect lawyers at PBL Law Group to safeguard your rights and navigate the claims process. For broader strata law matters, consult with PBL Law Group’s experienced strata lawyers for trusted expertise tailored to your needs.

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