Understanding Major Defects in Residential Buildings under the Home Building Act 1989 (NSW): A Comprehensive Guide

Major defects in residential buildings have become a pressing concern, particularly in the aftermath of high-profile evacuations like Mascot Towers and Opal Tower in Sydney, NSW. In a study conducted by the University of NSW City Futures Research Centre, it was revealed that a significant percentage of owners’ corporations have reported major defects in their buildings, with water leaks, structural cracking, and water penetration being the most prevalent issues. This article aims to shed light on the concept of major defects, their legal implications, and how they can impact homeowners in NSW.

Table of Contents

What Constitutes a Major Defect in NSW?

Under the Home Building Act 1989 (NSW), a major defect is defined as a defect in a “major element” of the building that has the potential to render it unusable for its intended purpose or poses a risk of collapse or destruction. According to the court in Ashton v Stevenson [2019] NSWCATAP 67, a major defect refers to serious problems that significantly impact the building’s habitability, use, and potential destruction. To be classified as a major defect under the Home Building Act, the following criteria need to be established:

1. Major Elements of a Building

The defect must involve a “major element” of the building, as listed in section 18E(4). These major elements include:

  • Internal or external load-bearing components essential for the building’s stability such as foundations, footings, floors, walls, beams;
  • Fire safety systems;
  • Waterproofing;
  • Any other elements prescribed by regulations.

2. Causes of the Defect:

The defect must be attributable to defective design, faulty workmanship, substandard or defective materials, or failure to comply with the performance requirements of the National Construction Code, or a combination of these factors.

3. Consequences of the Defect:

Merely affecting a major element of the building is insufficient. The defect must have one or more of the following consequences:

  • Renders the building uninhabitable or unusable for its intended purpose.
  • Results in the destruction of the entire building or part of it.
  • Poses a threat of collapse to the whole or part of the building.
  • Meets the criteria of a defect prescribed by regulations (currently, only external claddings are prescribed as major defects).

Major Defects vs Non-Major Defects: What’s the Difference?

Under the Home Building Act, “non-major” defects, or “minor defects” are simply defined as any defect that is not a “major defect”. The difference can be highlighted with an example where corrosion in a steal beam that leads only to superficial and aesthetic effects would not typically constitute a major defect even though the steal beam is essential to the stability of the building. However, if the corrosion threatens the stability of the building attached to the beam, it would likely meet the criteria of a major defect. 

Statutory Warranties under the Home Building Act 1989

The Home Building Act provides homeowners with statutory warranties for residential building work, irrespective of the specific terms of the building contract. If a builder breaches any of these warranties, homeowners have the right to initiate legal proceedings in the NSW Civil & Administrative Tribunal (Tribunal). Specifically, Section 18E(1)(b) of the Home Building Act establishes a statutory warranty period of 6 years for a “major defect” in a residential building arising from faulty or defective workmanship. This is distinct to defects that are not considered a “major defect” where the warranty period is only 2 years. This means it is crucial to commence proceedings within the stipulated warranty period to ensure their validity. 

How to Identify Major Defects: Recent Guidance from the NSW Civil and Administrative Tribunal

Promptly identifying whether a defect qualifies as a major defect is of utmost importance. The warranty period varies depending on the nature of the defect. To safeguard homeowners’ rights, it is essential to assess defects as early as possible to ensure timely legal action and resolution.

As seen in a recent appeals case, Vella v Mir [2019] NSWCATAP 28, when identifying major defects there is a systematic process that the tribunal goes through with the steps being:

  1. firstly determining the statutory warranty period start date;
  2. assessing whether prior warranties have been enforced, and if so, evaluating whether the Home Building Act allows one to make a claim for a different defect to be made;
  3. Establishing if each alleged defect pertains to a major element of the building;
  4. Establishing if each alleged defect pertaining to a major element is a “major defect”; and
  5. determining whether the warranty claim was established within the applicable time frame (with reference to when the warranty period start date begins).

Furthermore, as clarified in another recent case of Ashton v Stevenson [2019] NSWCATAP 67, a defect qualifies as ‘major’ if it has had or will likely have a tangible impact on the building’s integrity, inhabitation, or intended use or, alternatively, the building defects must pose a real or imminent risk of destruction. An example would be a defect affecting a load-bearing component of a building to such an effect that it is likely to cause the collapse of the building). It was also made clear in the case that mere inconvenience or speculation of effects won’t meet the criteria of being a “major defect”, and neither is any incidental damage or superficial deterioration, like ceiling water stains.

For example, if a minor leak in the waterproofing of a bathroom does not significantly hamper its intended usage as a bathroom, it may not qualify as a major defect. However, if the leaking causes substantial damage to the bathroom or prevents occupants from engaging in normal hygiene activities, compromising the room’s habitability, the defect would fall under the definition of a major defect.

Building Evidence for Major Defect Claims

When presenting a major defect claim before the Tribunal, it is crucial to provide evidence that explicitly engages with the Act’s definitions of major elements and major defects. This evidence should demonstrate that the defect affects the building’s integrity, impedes its habitability or intended use beyond mere inconvenience, or poses a real or imminent risk of destruction. Notably, expert evidence is pertinent but not the sole determining factor. Ultimately, homeowner or occupant evidence plays a significant role in establishing the presence of a “major defect”. Evidence such as details on the extent and frequency of issues like water penetration and their impact on living conditions, holds substantial weight. This is why it is important for homeowners and occupants to document any defects and their effects and frequency with as much detail as possible, as soon as possible.

Conclusion

Understanding major defects in residential buildings and the associated legal framework is crucial for homeowners seeking recourse for building-related issues. By understanding what defines a major defect, being aware of the protections afforded by statutory warranties under the Home Building Act and their time limitations, and aligning evidence with legal requirements, homeowners can navigate the process more effectively. Remember, timely action and building a strong case are key to achieving a favorable outcome in major defect claims.

If you suspect a breach of statutory warranties in your building contract, our team at PBL Law Group can provide the expert assistance you need. Our construction and strata lawyers specialise in handling such cases and can offer guidance and representation tailored to your situation. From assessing your claim to providing legal advice and pursuing remedies for defective building work, we are committed to protecting your rights.

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Authored by

Raea Khan

Director Lawyer

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Raea Khan Circle
Director Lawyer
Raea Khan

Raea is Managing Director and Principal Lawyer for PBl Law Group. Raea assists clients with major projects, property developments, construction and strata law.

He has worked in Western Australia and Queensland assisting with expansion projects in the energy and resource sector and now predominately advises clients in Strata and Community Association matters.

He is a member of the Australian College of Strata Lawyers where majority of his work is advising developers and owners corporations with dispute related minor and major defects, strata governance and common property litigation. He is proficient at leading negotiations and meetings.

Raea has a particular interest in the commercial aspect of any dispute and always tries to weigh up the risk, reward and benefit of legal proceedings at each different stage.

Raea enjoys all forms of competitive sport, including Crossfit and actively participates in Triathlons, representing Australia as an age group athlete. He was a member of Red Head Surf Lifesaving club.

  • Strata Law
  • Construction & Major Projects
  • Commercial and Business Law
  • Planning & Environment Law