NSW: Q&A The First AGM, Building Defects and the Statutory Warranty

NSW Lot Owners are wondering what they need to know about building defects ready for the first AGM.

Table of contents:

• QUESTION: What does the extended limitation period for damage claims under Section 106(6) mean for lot owners?
• QUESTION: We’ve discovered that building work carried out on our building in 2017 is not compliant. Who is liable for the costs to rectify the defect?
• QUESTION: Could the defect issues in NSW be resolved by going back to the model of Councils providing the building certificates instead of relying on private certifiers?
• QUESTION: What do we do about urgent defects? Do we wait until the builder / developer resolves the matter or should we carry out the necessary repairs and then claim the costs?
• QUESTION: How long after the building is built are we covered for any building defects? We have loud banging noises which have been reported since day one.
• QUESTION: What should lot owner’s know at the First AGM regarding building defects? Do we need to know about enforcing statutory warranties?

Question: What does the extended limitation period for damage claims under Section 106(6) mean for lot owners?

Answer: Instead of an owner having only two (2) years from when the loss occurred to bring a claim for damages arising from a maintenance failure, they now have six (6) years to bring the claim.

The extended limitation period means that instead of an owner having only two (2) years from when the loss occurred to bring a claim for damages arising from a maintenance failure, there is now an additional four (4) years, totalling six (6), to bring the claim.

This means an owner has a lot more time to prepare their case before their rights to claim is statute barred. This is benefits owners and owners corporations as it also allows the parties more time to possibly resolve such a dispute without requiring an owner to file at NCAT to preserve time.

However, the exact implementation of this extension is to be clarified in the regulations, so we would have to wait and see how it will roll out.

Matthew Lo
Kerin Benson Lawyers
E: [email protected]
P: 02 8706 7060

This post appears in Strata News #744.

Question: We’ve discovered that building work carried out on our building in 2017 is not compliant. Who is liable for the costs to rectify the defect?

There are four double-storey units in our complex of 10. In 2017, we replaced the balustrades on the building. A new owner had a building inspection done and discovered the work doesn’t meet Australian Standards. The balustrades are 5cm short of the required height.

Our strata management thinks the owners corporation should pay for rectifying the defect. Should this breach be the responsibility of the builder? Is our strata management liable for signing off on incorrect building standards?

Answer: This depends on whether a claim for breaches of the statutory warranties was made against the original builder and/or developer under relevant legislation.

This depends on whether a claim for breaches of the statutory warranties under the Home Building Act 1989 or a similar claim was made against the original builder and/or developer under other relevant legislation, such as the Design and Building Practitioners Act 2020.

If it was the case and brought within the statutory time limitation period, the builder and developer ought to be held responsible. If this is not the subject of a claim, the owners corporation would have entered into a contract or scope of works with the contractor.

That scope of works should be reviewed at first instance to ensure it was complied with and there was no breach by the contractor. This is an owners corporation responsibility. Whether the strata is responsible will be how the works were approved by the owners corporation at first instance, with meetings being held and resolutions passed unless the strata manager had a power of delegation under the strata managing agency agreement.

Liability limited by a scheme approved under Professional Standards Legislation.

Pierrette Khoury
Khoury Lawyers
E: [email protected]
P: 0415 459 486

This post appears in the October 2023 edition of The NSW Strata Magazine.

Question: Could the defect issues in NSW be resolved by going back to the model of Councils providing the building certificates instead of relying on private certifiers?

Answer: This is an industry issue that requires a whole of industry and community resolution.

Bruce McKenzie, Sedgwick:

Both councils and private certifiers have been involved in buildings with defects, therefore the issue extends beyond the certifying body. The Design and Building Practitioners Act provides a better pathway for new building works including declared designs that are checked prior to construction. Further accountability through LDI technical inspections and iCert ratings are just a few of the changes in NSW that are changing the way builders opertate to drive better outcomes.

Corey Nugent, Resilience Insurance:

The evidence doesn’t suggest one is significantly better or worse than the other. While there is a misconception that privatisation and enabling private certifiers has driven or facilitated the issues we currently see, this goes against all evidence in the research (including and highly importantly through the Building Confidence Report), instead highlighting the issue is spread across the entire segment – from design and professional services to developers, builders, consumers and OC and then to the sub-trades and other participants.

Recent presentation of audits into Private Certifiers and Local Councils by the NSW Building Commissioner showed a very different picture to that inferred in the question, with councils having a noticeably high negative outcome in audit on compliance, documentation and action than private certifiers. While this may not support the narrative of some in the community, the evidence is growing and quite clear that private certification and involvement is not the issue. This is an industry issue that requires a whole of industry and community resolution.

Bruce McKenzie
Sedgwick
E: [email protected]
P: 1300 735 720

Corey Nugent
Resilience Insurance
E: [email protected]
T: 0450 862 945

This post appears in the April 2023 edition of The NSW Strata Magazine.

Question: What do we do about urgent defects? Do we wait until the builder / developer resolves the matter or should we carry out the necessary repairs and then claim the costs?

Answer: Register the building with Project Intervene as soon as possible.

Bruce McKenzie, Sedgwick:

The best course of action is to register the building with Project Intervene as soon as possible, noting the urgent items. This will enable the Office of the Building Commissioner and/or Department of Fair Trading the opportunity to assist.

Corey Nugent, Resilience Insurance:

It is advisable to manage urgent and safety related issues immediately to ensure the risk to occupants and the public is adequately contained. Despite any action to address those issues as the first priority, post that, notifying the insurer should be an immediate second measure to enable the claim process to commence.

The insurer will immediately and without delay ensure action is in place to investigate and assure administration is seamless, including any accommodation matters.

Bruce McKenzie
Sedgwick
E: [email protected]
P: 1300 735 720

Corey Nugent
Resilience Insurance
E: [email protected]
T: 0450 862 945

This post appears in the April 2023 edition of The NSW Strata Magazine.

Question: How long after the building is built are we covered for any building defects? We have loud banging noises which have been reported since day one.

How long after the building is built are we covered for any defects?

We have banging noises that have been reported since day one, and no one can find out what it is. How long are we covered if anything happens to the building? The builder is happy to fix but no one knows what it is.

Answer: You need to work out what the problem is before you can work out who’s responsible.

Banging noises in my experience is usually a thing called water hammer. Water hammer happens when the pipes in the building have pressure in them and they bash against each other. Or it’s sometimes the cause of the noise is the lift, but I’d say its water hammer.

We had this issue in one of our city buildings and we had a hydraulic engineer come and work out what needed to be done. I’ve also had the problem in smaller buildings that didn’t get a hydraulic engineer. They turned down the water pressure on the pumps as well as the hot water system so the water wasn’t flying up and causing that bang. There are sometimes a few things you can do about that.

The easiest way to find out what the issue is, is to get your local plumber or your pump technician to have a look at it and see if there’s anything that they can see.

If not, you can get a hydraulic report. But, to answer your question I think you need to work out what the problem is before you can work out who’s responsible. It’s awesome that the builder wants to come back, but I think you’ll probably need to do them a favour and try and work with them or maybe even their original hydraulic engineer and work out what’s causing the problems. Look at how to fix it and solutions around that and then have the conversation.

Rod Smith
The Strata Collective
T: 02 9879 3547
E: [email protected]

This post appears in the August 2020 edition of the NSW Strata Magazine.

Question: What should lot owners know at the First AGM regarding building defects? Do we need to know about enforcing statutory warranties?

My son recently bought a new top floor unit in a 3 storey new complex. We settled late 2018 and had found several defects which we emailed to our conveyancer to send onto the developer’s/vendor’s solicitor.

It was close to Christmas and tradesmen went on holiday. None of the defects were rectified until mid-Jan when workmen returned to work. It took numerous texts, emails, calls to the developer who told us that we should contact his builders, who told us that it is not their responsibility to get some of the defects done.

My son did not move into the unit until 1 1/2 months after settlement. We are having the first AGM soon and we have a lot of questions regarding the developer’s responsibilities and our rights as the purchaser in this complex to ensure that it is minuted in the minutes.

What should lot owners know at the First AGM?

Does the developer continue to be responsible for any defects for the next 6 years according to the NSW Home Building Act so that expenses do not come out from the owners corporation?

Having dealt with both the developer and builders for the last 2 months we found them to be very doggy and we want to ensure that their dogginess is not going to impact the owner’s corporation’s funds.

Answer: The owners corporation needs to enforce the statutory warranties – depending on the contract date for the works.

The system is based on self-help. The owners corporation needs to enforce the statutory warranties – depending on the contract date for the works, the owners corporation may have 2 year/6 years warranties for non-major and major defects respectively.

The Owners Corporation will need to engage expert specialists to assist in determining the nature of each defect, this will report will assist with negotiations and legal proceedings if negotiations are unsuccessful in addition to properly determining a core list of defects within the building.

Of course, if the developer was “honourable”, then they would be fixing the defects at their own costs but in some cases, it does require an owners corporation to take legal action to enforce its warranty rights.

Leanne Habib
Premium Strata
P: 02 9281 6440
E: [email protected]

This post appears in Strata News #237.

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These articles are not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

Read next:

• NSW: Cladding Update – Lacrosse Tower Fire Decision: The Importance of Statutory Warranties
• NSW: Q&A Remediation of Serious Building Defect

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