Disclosure of Building Works in a Contract for Sale of
It is often the case when acting for Vendors that the first
question we ask is whether any building works have been undertaken
to the property. If the answer is yes, then there are a series of
issues that must be considered:
Is there a building contract?*
Was the work undertaken on an owner-builder basis?*
What was the value of the work?* (*These questions are
necessary to determine whether a Home Owners Warranty Insurance
Certificate is required).
Has the work been completed?
Are there any defects in the work and are they of a structural
or non-structural nature?
Has an Occupation Certificate been issued for the building
Whilst this list may seem overwhelming, it is important to be
aware of the legislative requirements imposed when considering
selling a property where building works have been undertaken, as
there are certain disclosure requirements imposed on a Vendor,
which may be applicable depending upon the date the work was
In the circumstances where the building works were not carried
out under a Building Contract and an Owner-Builder permit has been
obtained from the Department of Fair Trading, section 96 of the
Home Building Act 1989 (NSW), requires that a contract of insurance
must be taken out. If the property is to be sold within 6 years of
completion of the work it will be necessary for the Vendor to
obtain home warranty building insurance from approved insurers
where the value of the work exceeds $12,000.00. A Home Owners
Warranty Insurance Certificate must be attached to any Contract for
Sale of Land. Failure to comply with this obligation will result in
statutory penalties and the Contract being deemed voidable at the
option of the Purchaser.
One complexity for Vendors and in particular Vendors who have
carried out the works as an Owner-Builder, is the need to determine
the date of completion of the works, especially if an Occupation
Certificate has not been issued.
Section 3B of Home Building Act 1989 (NSW) provides a
presumption for determining the date of completion of the works,
which will apply to work carried out by Owner-Builders. Section
3) It is to be presumed (unless an earlier date for
practical completion can be established) that practical completion
of residential building work occurred on the earliest of whichever
of the following dates can be established for the work:
the date on which the contractor handed over possession of
the work to the owner,
the date on which the contractor last attended the site to
carry out work (other than work to remedy any defect that does not
affect practical completion),
the date of issue of an occupation certificate under the
Environmental Planning and Assessment Act 1979 that authorises
commencement of the use or occupation of the work,
(in the case of owner-builder work) the date that
is 18 months after the issue of the owner-builder permit for the
Essentially, section 3B provides, when there is no building
contract to determine when the work is complete, the work is deemed
to have been completed on the date of practical
completion as determined under either section 3B depending
on the circumstances, so long as part of the property where the
works were undertaken are reasonably capable of being used for its
intended purpose, despite any minor omissions or defects.
The case of Griffiths v Gates (Home Building) 
NSWCTTT 302 discusses the interpretation of section 3B, stating
that "a successor in title to an owner-builder is entitled
to exactly the same warranty as if he purchased the property from
the contractor who did the work. The only issue is from which date
the time for the warranty runs. In each case it is completion of
the work as defined under section 3B".
In this case, practical completion of the works was determined
in accordance with section 3B and therefore lodging amended plans
for approval (as the balustrade did not comply with the original
Development Application), did not affect the date of practical
completion, as the amended plans did not alter the fact that the
property was perfectly capable of being used for its intended
Care must be taken when compiling all disclosure material for a
Contract for Sale of Land to ensure that the disclosure of any
previous building works and the inclusion or exclusion of evidence
of the Home Owners Warranty insurance is compliant with the Home
Building Act 1989 (NSW).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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