NSW Court Confirms Strict 10-Year Limit for Home Building Act Claims

Introduction

The limitation period for building defect claims under the Home Building Act 1989 (NSW) is a critical issue for owners corporations, builders, and insurers. Recent decisions by the NSW Supreme Court have clarified that the 10-year long-stop limitation period is strict and absolute, starting from the date the occupation certificate is issued, regardless of when defects are discovered or when an insured event occurs.

Understanding how the court clarifies the operation of this long-stop limitation period is essential for anyone involved in home warranty insurance or contribution claims. Given the complexity of the statutory framework and insurance policies, consulting a strata building defect lawyer is vital to ensure claims are made within the required timeframe and to protect your rights under the Home Building Act 1989 (NSW).

An Overview of The Owners v Dyldam Developments Case for Your Strata Corporation

Background of the Strata Building Defect Claim

The case of The Owners – Strata Plan No. 81376 v Dyldam Developments Pty Ltd [2025] NSWSC 438 involved a 98-unit residential strata scheme in Parklea, New South Wales. An occupation certificate for the building was issued on 4 September 2008, which marked the completion of the original construction work.

After discovering defects, the Owners Corporation began legal proceedings in 2013 against both the builder and developer, alleging breaches of statutory warranties under the Home Building Act 1989 (NSW).

Over the following years, the parties entered into settlement agreements in 2017 and 2021, which required the builder to carry out rectification works. However, the Owners Corporation claimed that these repairs were also incomplete and defective.

A critical turning point came in 2022 when both the builder and the developer went into administration. This insolvency triggered the “last resort” home warranty insurance policy, prompting the Owners Corporation to lodge a claim with the insurer for approximately $13 million to cover the cost of rectifying the defects.

The Key Questions Before the NSW Supreme Court

The insurer denied the claim, arguing it was made outside the 10-year long-stop limitation period. The dispute required the NSW Supreme Court to clarify whether the Owners Corporation’s communications constituted valid and timely claims under the policy and the Home Building Act 1989 (NSW).

The Court was asked to determine three specific questions to resolve the matter:

• Did a letter sent to the insurer in 2012 qualify as a valid claim under the policy?
• Was a claim made in a letter dated January 2022, following the builder’s insolvency, submitted within the required timeframe?
• Was a further claim made in a letter from June 2022, related to the rectification work, considered to be within time?

Why Early Notifications Do Not Stop the 10-Year Clock

The Difference Between a Notification & a Valid Claim

A critical distinction exists between notifying an insurer of a potential issue and lodging a valid claim under a home warranty insurance policy. Sending a letter, even one titled “Notification of Claim,” does not automatically qualify as a formal claim that stops the 10-year long-stop limitation period. The court clarified this point in the case concerning The Owners – Strata Plan No. 81376 v Dyldam Developments.

While a letter of demand may not be a valid claim, it can serve an important purpose under the Home Building Act 1989 (NSW). In particular, Section 103BB(3) of the Home Building Act 1989 (NSW) allows such correspondence to be treated as a notification that preserves the right to make a “delayed claim” after the standard policy period expires. For example, the 2012 letter sent to the insurer was accepted as a valid notification for a delayed claim.

However, this notification does not pause or extend the absolute 10-year deadline. The eventual claim must still be formally made before the long-stop limitation period expires. In The Owners – Strata Plan No. 81376 v Dyldam Developments case, even though the 2012 notification was valid, the actual claim in 2022 was barred because the 10-year period had already concluded in 2018.

Builder Insolvency as a Necessary Trigger for a Claim

Home warranty insurance in NSW is structured as a “last resort” policy, meaning it only activates after a specific trigger, known as an “Insured Event,” occurs. A valid claim cannot be lodged until one of these events takes place. The court confirmed that the builder’s insolvency is a condition precedent to cover under such policies.

The policy only responds to loss resulting from an Insured Event, which typically includes:

• Insolvency: The builder enters administration or becomes insolvent.
• Death: The builder passes away.
• Disappearance: The builder cannot be located after diligent search and inquiry.

This requirement was central to the court’s findings. The 2012 letter from the Owners Corporation was not a valid claim because the builder was not insolvent at that time. The builder’s insolvency, the necessary Insured Event, did not happen until 2022, years after the 10-year long-stop period had already expired.

Rectification Work Does Not Reset the Home Building Act 1989 (NSW) Long-Stop Period

The Court’s Interpretation of Section 92(5) of the Home Building Act

The Owners Corporation argued that rectification works completed by the builder extended the 10-year long-stop limitation period. This argument was based on Section 92(5) of the Home Building Act 1989 (NSW), which states that an insurance contract for original work also extends to any rectification work done by the same person.

The Supreme Court of NSW firmly rejected this interpretation. The Court concluded that the natural and ordinary meaning of Section 92(5) is that the insurance policy’s coverage extends to rectification work, but only while that policy remains in force.

In practical terms, this means:

• The policy expires at the end of the 10-year period. 
• No amount of rectification work can resurrect an expired policy or restart the limitation clock.
• Repairs carried out within the 10-year window remain covered by the existing insurance.

The Alarming Effect of Extending an Insurer’s Risk

The Court highlighted the significant risks and policy implications of accepting the Owners Corporation’s argument. Allowing rectification work to reset the 10-year long-stop limitation period would undermine the certainty that the provision was designed to create for insurers.

Justice Stevenson noted that such an interpretation would have an “alarming effect,” potentially extending an insurer’s risk indefinitely.

For insurers, the practical consequences could include:

• Successive minor repairs periodically re-triggering liability.
• Home warranty insurance policies responding indefinitely.

This outcome is directly contrary to the legislative intent of the Home Building Act 1989 (NSW), which established the long-stop period to provide a clear and final deadline for claims.

The Role of Occupation Certificates in the Limitation Period

How an Occupation Certificate Triggers the 10-Year Countdown

The issuance of a final occupation certificate is the definitive event that starts the 10-year long-stop limitation period for a building claim in NSW. Under Section 3C(2)(a) of the Home Building Act 1989 (NSW), this certificate officially marks the completion of residential building work for a new strata building.

This date is critical because it begins the absolute deadline for lodging any future home warranty insurance claims. The Supreme Court of NSW reinforced this principle in The Owners – Strata Plan No. 81376 v Dyldam Developments, where the occupation certificate was issued on 4 September 2008, establishing the completion date for the work. As a result, the 10-year statutory limitation period under Section 103BC(1) of the Home Building Act 1989 (NSW) expired on 4 September 2018, making any claims after this date out of time.

This trigger mechanism provides certainty for all parties involved. The key points are:

• The countdown begins the day the occupation certificate is issued.
• This starts the strict 10-year period for making an insurance claim.
• The deadline is absolute and applies regardless of when defects are discovered.

The Court’s Rejection of the Ineffective Occupation Certificate Argument

The Owners Corporation put forward a novel argument that the occupation certificate was ineffective because it did not authorise certain parts of the development. They contended that if the certificate was invalid, the building work was never legally “completed,” meaning the 10-year long-stop limitation period had not commenced.

Justice Stevenson firmly rejected this argument. The court held that an occupation certificate issued in breach of statutory conditions is not automatically invalid. The court’s reasoning was based on several factors, including:

• The Environmental Planning and Assessment Act 1979 (NSW) provides for invalidity in other sections but is silent on this point for occupation certificates issued under Section 109H.
• Finding the certificate invalid would lead to the “startling result” that the building’s occupation had been unlawful for over a decade, an outcome Parliament could not have intended.

The court, citing the High Court case of Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28, concluded that the date on the issued occupation certificate stands as the trigger for the 10-year period. This decision provides clarity that alleged defects in an occupation certificate cannot be used to circumvent the absolute deadline set by the Home Building Act 1989 (NSW).

Why Your Strata Corporation Needs Expert Legal Advice

The recent NSW Supreme Court decision highlights the need to grasp the strict statutory framework governing home warranty insurance. Interpreting the complex provisions of the Home Building Act 1989 (NSW) and the precise wording of insurance policies demands specialised legal knowledge to protect your strata corporation’s rights.

Subtle policy distinctions can have far-reaching consequences; therefore, engaging a specialist strata lawyer is crucial for tasks such as:

• Pinpointing how nuances in policy drafting influence coverage.
• Confirming when a builder’s insolvency triggers a claim under the policy.
• Ensuring strict compliance with statutory timeframes, including the 10-year long-stop limitation period.
• Lodging valid and timely claims while steering the corporation through strata disputes and insurance litigation.

Conclusion

The NSW Supreme Court’s decision clarifies that the 10-year long-stop limitation period under the Home Building Act 1989 (NSW) is absolute, commencing from the date on the occupation certificate. This ruling confirms that neither early notifications to an insurer nor subsequent rectification works can extend this strict deadline for a home warranty insurance claim.

This case underscores the critical importance of acting promptly and formally when pursuing a building defect claim. For specialised legal guidance to ensure compliance with these strict timeframes, contact the expert strata lawyers at PBL Law Group today to protect your rights.

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