Traditionally, many building and construction disputes involve each party claiming that the other party is responsible for any defects that might have occurred.
Following recent legislation, the playing field for building disputes has changed significantly, with a new duty of care being imposed on basically everyone involved in the construction process.
These rights and obligations kicked in on 11 June 2020, so read on to understand how this could affect you as a builder or owners corporation.
Understanding the Changes
The changes have come in via a new act called the Design and Building Practitioners Act 2020.
The changes work to impose a “duty of care” on a person who carried out construction work.
A “duty of care” is the starting point for many claims by building owners. The idea is that, to be liable to a building owner, a person had to owe that owner a duty. Traditionally it has been easy to impose a duty on the immediate builder. However, it can become harder and harder to establish a “duty of care” the further down the chain you go. So, for example, demonstrating that a sub-sub-contractor or a designer owed a duty of care to the building owner was not always that easy.
This legislation aims to make it easier to lay that fundamental building block of a construction claim.
Under this legislation, a person who “carried out construction work” must exercise reasonable care to avoid economic loss caused by defects in or concerning the building at which the work was done, and arising from the construction work.
In real terms, that means owners (including subsequent owners as we discuss below) can now potentially pursue designers, project managers, subcontractors, engineers and architects (to name a few) involved in the original build. Previously there would have been any number of hurdles having a direct claim against those parties.
What is Construction Work?
Construction work is given an expansive definition, meaning:
- Building work
- Designs for building work
- Manufacturing or supplying a building product used for building work; and
- Supervising, coordinating, managing or having control over the doing of any of the above.
As you can see, the legislation casts a wide net.
But it doesn’t end there.
Who Gets the Benefit of the Duty?
Historically one of the more challenging aspects of establishing a claim for building defects has been when the claimant is a subsequent owner and not the person for whom the work was actually done.
The new legislation attempts to make that less of a problem. The duty imposed under the legislation is owed to, as relevant:
- the owner of the land on which the building is located;
- an owners corporation
- a community association
- an individual lot owner
- subsequent owners (i.e. later owners that weren’t owners at the time the building was constructed).
Right now the
What Can Owners Claim?
Under the legislation, owners can claim for the costs of rectifying defects as well as consequential losses.
Importantly for owners, if the loss or damage first became apparent any time after 11 June 2010 (yes – 10 years ago), then you can still make a claim under this legislation.
However, an owner’s claim might have other areas of loss or damage that can be claimed under general legal principles too. Homeowners might also have other legislative avenues for their claims like the Home Building Act 1989.
These other claims might have different time periods applicable to them, so it’s essential to get advice ASAP if you’re experiencing issues relating to building defects.
How Can The Building Industry React?
While the legislation imposes a duty of care on all building industry participants and allows the owners to pursue them, it does not automatically create liability.
So just because you were involved in a project where defects arose, it does not mean you will be responsible for rectifying them.
And, because often defects are not the responsibility of one party, it is open to you to try and apportion any losses with other responsible parties. So if an engineer and an architect jointly arrived at a faulty conclusion, they could seek to apportion any loss or damage between them.
In commercial terms, you should also ensure that your insurance broker is aware of the potential nature and scope of claims, including the potential timing of them. This is especially the case if you are looking at cancelling a “claims made” type policy before your potential risks are over.
If you need help figuring out whether the new legislation might impact you (either as a claimant or a possible defendant), then reach out and we’d be happy to assist you.