News

Owners Corporations and other home owners can once again breathe a sigh of relief with the recent changes to the Home Building Act 1989 (“the Act”).

The amendments to the Act restore the rights of certain subsequent residential land owners that were removed by the 2010 NSW Court of Appeal decision in Ace Woollahra Pty Ltd v the Owners – Strata Plan 61424 & Anor (“Ace”).

Ace Woollahra Pty Ltd v the Owners – Strata Plan 61424 & Anor

In Ace, Wallis Street Developments Ltd (“the Developer”), pursuant to a joint venture agreement with the owner of the land at the time (PRC Ltd), contracted with the Builder to carry out construction of aged care units. The property was subsequently purchased from PRC Ltd by the Owners Corporation and the other unit holders. The Owners Corporation claimed that the Builder failed to carry out the residential building work in conformity with the statutory warranties implied in the building contract by s18B of the Act.

The issue arose as to whether the Owners Corporation could properly fall within the meaning of “successor in title” to the Developer and therefore bring itself within the umbrella of s18D of the Act.

Section 18D of the Act provides that “a person who is a successor in title to a person entitled to the benefit of a statutory warranty under this Act is entitled to the same rights as the person’s predecessor in title in respect of the statutory warranty.”

The person with the benefit of the warranty was the Developer (not PRC Ltd) and since no one technically bought from the Developer, (because it was not the owner of the land), neither the unit owners nor the Owners Corporation were a “successor in title.”

Whilst the Owners Corporation acknowledged that the Developer was not its predecessor in title, it argued it should be entitled to the Act’s protection by a purposive construction of s18D.

Unfortunately for the Owners Corporation, the court agreed with the Builder stating that the Owners Corporation was not entitled to enforce the statutory warranty against the Builder because there was no contractual relationship between its predecessor in title (PRC Ltd) and the Builder.

Amendments to the Act

The amendments to the Act mean that statutory warranties in respect of home building work are now available to subsequent purchasers of residential property, even where there is no contractual relationship between the builder and the purchaser’s predecessor in title.

Section 18(D) of the Act now provides that a person who is a non-contracting owner in relation to a contract to do residential building work on land is entitled (and is taken to have always been entitled) to the same rights as those that a party to the contract has in respect of a statutory warranty.

The changes will apply retrospectively to all contracts made and insurance policies issued since 1 May 1997.

The amendment appears to restore the operation and intent of the Act to ensure homeowners can rely on both statutory warranties under the Act and Home Owners Warranty Insurance.