A Strata Property Owner’s Guide to Successor in Title Rights Under the NSW Home Building Act

Introduction

Understanding successor in title rights under the Home Building Act 1989 (NSW) is essential for strata property owners and anyone purchasing residential property in New South Wales. These rights, set out in Sections 18C and 18D, provide important statutory warranty protections for both immediate and subsequent owners, ensuring that issues with defective building work can be addressed even if the current owner did not contract with the original builder.

For strata owners, knowing who qualifies as a successor in title and how these statutory warranties apply is crucial for protecting property investments and managing building defects. This guide explains the key legal principles and practical steps involved, helping strata property owners navigate their rights and obligations under the Act.

Interactive Tool: See If You Qualify for Statutory Warranty Rights

Understanding Sections 18C & 18D of the Home Building Act 1989 (NSW)

Explaining Section 18C for Immediate Successors

Section 18C of the Home Building Act 1989 (NSW) provides statutory warranty protection to the first person who purchases a property from certain parties. This individual is known as the immediate successor in title.

The provision ensures that this buyer is entitled to the benefit of statutory warranties under the Home Building Act 1989 (NSW) as if they had a direct contract with the original party responsible for the work.

This protection applies when the property is purchased from:

• Owner-builder
• Licensed builder or former holder of a contractor licence
• Developer

For example, if an owner-builder completes residential building work and then sells the property, the first buyer can make a claim under Section 18C for any breach of statutory warranty. The law treats the situation as though the owner-builder had a contract with that buyer to perform the work.

Explaining Section 18D for All Subsequent Owners

Section 18D of the Home Building Act 1989 (NSW) extends the protection of statutory warranties beyond the initial buyer. It ensures that any subsequent owner of the property inherits the same warranty rights as their predecessors.

Therefore, if a property is sold multiple times, each new owner is entitled to the benefit of the original statutory warranties.

This provision broadens the safety net for homeowners, allowing them to pursue the original builder or developer for defective work, regardless of how many times the property has changed hands.

To illustrate, if a home is built and sold to a buyer, who then sells it to a second buyer two years later, that second buyer still has the same rights as the first to make a claim for a breach of statutory warranty.

Key Differences Between Section 18C & 18D

The primary distinction between Section 18C and Section 18D of the Home Building Act 1989 (NSW) lies in who they are designed to protect.

Section 18C specifically applies to the immediate successor in title, the very first person to purchase the property after the residential building work has been completed by an owner-builder or developer.

In contrast, Section 18D uses the broader term successor in title, extending warranty rights to all subsequent owners.

Examples:

• If a developer sells a new apartment to a buyer, that buyer is the immediate successor covered by Section 18C.
• If that buyer later sells the apartment to someone else, the new owner becomes a successor in title under Section 18D.

Who Qualifies as a Successor in Title for NSW Strata Properties

Rights of Freehold Strata Property Owners

In a straightforward property purchase, the buyer is generally considered a successor in title, especially in freehold properties and most strata schemes involving the subdivision of freehold land.

They typically acquire ownership by:

• Purchasing a freehold house
• Acquiring a unit in a freehold strata building

This clear transfer allows the new owner to utilise sections 18C and 18D of the Home Building Act 1989 (NSW).

As a successor in title, the new owner inherits the same statutory warranty rights, enabling them to pursue claims against the builder or developer for defective residential building work.

Complexities for Leasehold Strata Properties

Leasehold strata schemes introduce significant complexities regarding successor in title rights.

In these arrangements, an entity such as a church or government body owns the land and grants long-term leases, often for 99 years, allowing for the construction of buildings.

The “purchasers” of units acquire a long-term leasehold interest, rather than a freehold title.

Courts have determined that this leasehold interest may be insufficient to qualify for successor in title rights.

In The Owners – Strata Plan No 91322 v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2019] NSWCA 89, the court found that an Owners Corporation with a 99-year leasehold interest was not a successor in title because:

• The trustees retained the freehold title
• The trustees maintained the right of reversion
• Consequently, the Owners Corporation could not enforce statutory warranties for building defects on the common property, a complex issue often requiring legal advice for an owners corporation.

Challenges in Other Complex Ownership Structures

The Home Building Act 1989 (NSW) does not provide a definition for “successor in title,” which can lead to disputes in non-standard ownership situations.

One prominent example involves a mortgagee in possession. In Gardez Nominees Pty Limited v NSW Self Insurance Corporation [2016] NSWSC 532, the NSW Supreme Court ruled that a mortgagee in possession does not qualify as a successor in title.

The court determined that:

• Taking possession is an exercise of a security right, not a transfer of legal title
• Since the actual title does not pass to the mortgagee, they cannot be considered a successor for enforcing statutory warranties

Your Legal Steps for Claiming Statutory Warranty Breaches in NSW

Identifying & Documenting Defective Building Work

The first step in making a claim involves a thorough assessment of your property to identify any potential defects in the residential building work. This process requires a careful examination of all aspects of the building, from structural elements to finishes, to determine if there has been a breach of the statutory warranties under the Home Building Act 1989 (NSW). Whether it is a standalone house or a strata property, comprehensive documentation is essential to building a strong case.

To properly document the issues, you should:

• Compile detailed records: Take extensive notes and capture clear photographs and videos of all identified defects. This visual evidence can be crucial in demonstrating the extent of the problem.
• Obtain an expert report: Engage a qualified building inspector to conduct a professional assessment. An expert’s report will formally outline the defects, explain their likely causes, and recommend the necessary rectification work, which significantly strengthens your claim.

Understanding the Strict Time Limits for Claims

Under the Home Building Act 1989 (NSW), strict time limits apply for commencing building and construction law proceedings for a breach of statutory warranty. These periods begin from the date the building work was completed and are enforced rigorously. Missing these deadlines can prevent a successor in title from being able to pursue a claim, regardless of how defective the work is.

The statutory warranty periods are:

• Six years for a breach that results in a major defect.
• Two years for any other non-major defect.

According to Section 18E of the Home Building Act 1989 (NSW), a major defect involves a critical part of the building, such as foundations, load-bearing walls, waterproofing, or fire safety systems. Importantly, if a defect only becomes apparent in the final six months of the warranty period, the law allows for an additional six-month extension to commence proceedings.

Key Legal Precedents for Strata Owners

The Gardez Nominees Case & Mortgagee Rights

The 2016 NSW Supreme Court case of Gardez Nominees Pty Limited v NSW Self Insurance Corporation [2016] NSWSC 532 provided significant clarification on the rights of mortgagees. The central issue was whether a mortgagee who takes possession of a property qualifies as a successor in title under the Home Building Act 1989 (NSW).

Gardez Nominees, having taken possession of a property as mortgagee, argued it was entitled to the statutory warranties for defective building work. However, the court ultimately ruled against this position.

• It found that a mortgagee’s interest in the land was insufficient to be considered a successor in title.
• The judgment explained that taking possession is merely the exercise of a security right under the mortgage and does not transfer the owner’s actual title to the mortgagee.

As the title itself does not pass, the mortgagee cannot inherit the statutory warranty rights of the owner.

The Owners Strata Plan 91322 Case & Leasehold Strata Rights

In the case of The Owners – Strata Plan No 91322 v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2019] NSWCA 89, the court examined successor in title rights within a leasehold strata scheme.

The Owners Corporation, which held a 99-year leasehold interest over the common property, sought to sue the developer for building defects by claiming it was a successor in title. The court determined that the Owners Corporation could not be considered a successor in title.

• The decision highlighted that the developer, who was the freehold owner, had only granted a long-term lease and had not transferred the freehold title.
• Because the Owners Corporation’s interest was leasehold, it fell short of the complete transfer of title required to inherit statutory warranty rights.

This case has major implications for owners in leasehold strata arrangements, confirming that they may not have the same protections as their freehold counterparts.

Conclusion

Understanding your rights as a successor in title under the Home Building Act 1989 (NSW) is vital for protecting your strata property investment. This involves knowing how statutory warranties apply, the strict time limits for claims, and the legal distinctions between freehold and complex leasehold ownership structures.

If you are facing issues with building defects in your strata property, it is crucial to seek expert legal guidance. For trusted expertise tailored to your needs, contact the specialist strata defect lawyers at PBL Law Group, a leading strata law firm in Sydney serving NSW, today to understand your legal options and protect your rights.

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