Introduction

For owners corporations in New South Wales, understanding the statutory limitation period for a building defect claim is critical to protecting their rights. The Home Building Act 1989 (NSW) imposes a strict 10-year “long stop” provision, which acts as an absolute deadline for making an insurance claim for building defects, regardless of when they are discovered.

The commencement of this critical 10-year period is triggered by the issuance of a final occupation certificate, a detail recently affirmed by a significant Supreme Court of NSW decision. This guide will examine that pivotal case to clarify how an occupation certificate affects the limitation period for your NSW building claim, navigating the complexities alongside the broader statutory duty of care framework in the design and building industry.

The 10-Year Long Stop Provision in the Home Building Act

What is the Statutory Long Stop Limitation Period

Under the Home Building Act 1989 (NSW), there is a strict deadline for making an insurance claim for building defects. This is known as the “long stop” provision.

Section 103BC(1) of the Home Building Act 1989 (NSW) establishes that a claim must be made within 10 years after the completion of the insured work. This 10-year limitation period is an absolute final deadline. It applies regardless of when a defect is discovered, meaning no building claim can be made under any circumstances more than 10 years after the work is completed.

The Purpose of Last Resort Home Warranty Insurance

Home warranty insurance in New South Wales is designed as a “last resort” policy. This means that an owners corporation or homeowner can typically only make a claim after a specific “Insured Event” has occurred. A breach of statutory warranty is generally only covered if one of these trigger events takes place.

The policy is activated by specific circumstances that prevent the builder from rectifying defects or paying compensation. These Insured Events usually include:

Insured Event	Description
Insolvency	The builder becomes insolvent, which was a condition precedent in the case of The Owners – Strata Plan No. 81376 v Dydlam Developments Pty Ltd.
Death	The builder passes away.
Disappearance	The builder disappears and cannot be located after due search and inquiry.

The Role of the Occupation Certificate in Starting the Limitation Period

Defining the Completion Date for New Strata Buildings in NSW

Under the Home Building Act 1989 (NSW), the completion date for residential building work in a new strata building is clearly defined. Section 3C(2)(a) of the legislation specifies that the work is considered complete on the date that an occupation certificate is issued for the entire building.

This statutory provision serves as the official marker of completion and is crucial for determining when the clock starts for any future building claim in New South Wales.

How an Occupation Certificate Triggers the 10-Year Countdown

The issuance of an occupation certificate is the critical event that initiates the 10-year long stop limitation period. This certificate signifies that:

• The residential building work is officially complete
• The countdown for making an insurance claim has begun

For example, in the Dyldam case, the occupation certificate was issued in September 2008, marking the completion of the work under section 3C of the Home Building Act 1989 (NSW). As a result, the 10-year statutory limitation period expired in September 2018, which meant any claims made after this date were considered out of time.

The Supreme Court of NSW Decision in The Owners v Dyldam Developments

Background of the Defective Building Claim

The case of The Owners – Strata Plan No. 81376 v Dyldam Developments Pty Ltd involved a 98-unit residential development in Parklea, New South Wales. An occupation certificate for the building was issued on 4 September 2008. Subsequently, the Owners Corporation discovered defects in the building work.

Between 2013 and 2021, the Owners Corporation, the builder, and the developer entered into various settlement agreements to rectify the defects. However, the Owners Corporation alleged that these remedial works were also defective and incomplete.

In 2022, both the builder and the developer went into administration, triggering an “Insured Event” under the last resort home warranty insurance policy. Following this insolvency, the Owners Corporation made a building claim to the insurer for approximately $13 million to cover the losses.

The Argument on Ineffective Occupation Certificates & Work Completion

A central issue in the building claim was the validity of the occupation certificate issued in 2008. The parties agreed that the certificate did not authorise certain parts of the development, leading the Owners Corporation to argue that it was ineffective.

Based on this position, the Owners Corporation presented two key arguments:

• The building work was never legally “completed” under the Home Building Act 1989 (NSW)
• If the work was not completed, the 10-year long stop limitation period for making an insurance claim would not have commenced

Therefore, they contended their 2022 claims were made within the allowable timeframe.

The Court’s Ruling on the Validity of the Occupation Certificate

The Supreme Court of NSW rejected the Owners Corporation’s argument, holding that the occupation certificate from 2008 was not invalid. The court’s reasoning included several important considerations:

• Finding the certificate invalid would lead to the “startling result” that the building’s occupation had been unlawful for many years
• This outcome could not have been Parliament’s intention
• While other sections of the Environmental Planning and Assessment Act 1979 (NSW) provide for invalidity, the section concerning occupation certificates (section 109H) does not

This led to the conclusion that a certificate issued in breach of statutory conditions is not automatically void. As a result, the 10-year long stop period began when the final occupation certificate was issued on 4 September 2008 and expired on 4 September 2018, making the 2022 claims out of time.

Clarification on Rectification Works & Time Extensions

The Owners Corporation also argued that the rectification works performed under the settlement agreements extended the 10-year long stop period. They relied on section 92(5) of the Home Building Act 1989 (NSW), which states that an insurance contract extends to any residential building work done by way of rectification.

The court dismissed this argument, providing important clarifications:

• Section 92(5) extends insurance coverage to the rectification work itself but does not restart or extend the original 10-year limitation period
• The policy was only “in force” until the long stop period expired in 2018
• Section 92(5) could not revive the policy beyond that date

The court noted that allowing rectification work to extend the limitation period could lead to an “alarming effect” of extending an insurer’s risk indefinitely, which is precisely what the long stop provision was designed to prevent.

Key Lessons for Your Strata Corporation from the Dyldam Case

The Strict Application of the 10-Year Long Stop Period

The Dyldam case reinforces that the 10-year long stop provision under the Home Building Act 1989 (NSW) is a strict and absolute deadline for an insurance claim. For any building claim in New South Wales, this statutory limitation period begins on the date the final occupation certificate is issued.

Key points to understand about this limitation period:

Key Point	Detail
Unconditional Start	The countdown starts regardless of the occupation certificate’s effectiveness.
Absolute Deadline	The Supreme Court of NSW confirmed that an insurer’s cover ends precisely 10 years after the occupation certificate is issued.
Consequence of Delay	Any building claim made after this period will be rejected as out of time.

The Critical Role of Timely Claim Notification

It is crucial to notify an insurer of potential defects within the policy period, even if a formal claim cannot yet be made. This is particularly relevant when an “Insured Event,” such as the builder’s insolvency, has not yet occurred.

Under section 103BB(3) of the Home Building Act 1989 (NSW), early notification may preserve the right to make a “delayed claim” after the standard insurance period has expired. However, this does not extend the 10-year long stop limitation period.

The Dyldam case illustrates this important distinction:

• While a 2012 letter was accepted as a valid notification
• The subsequent 2022 claim was still barred because the 10-year period had already expired in 2018

Conclusion

The Home Building Act 1989 (NSW) imposes a strict 10-year long stop provision for building defect claims, which begins the moment a final occupation certificate is issued. As affirmed by the Supreme Court of NSW, this statutory limitation period is an absolute deadline, and neither rectification works nor delayed claims can extend it.

For expert legal guidance on managing a building claim and navigating the statutory limitation period in NSW, contact our specialised strata lawyers at PBL Law Group to ensure your rights are protected.

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