The Home Building Amendment Act 2014 (NSW) (the Amending Act) will significantly change the Home Building Act 1989 (NSW) (Home Building Act) and comes into force in late 2014 and early in 2015.

Key Points

  • The Amending Act will commence in three stages on 31 December 2014, 15 January 2015 and 1 March 2015.
  • The Amending Act contains a significant number of changes to the Home Building Act that impact all facets of residential building work, from the contractual terms of the contracts (including the way disputes are handled) to the insurance required by owner-builders.
  • Many sections of the Amending Act are retrospective and will apply to all contracts, disputes and insurances, regardless of whether the contracts were entered into prior to the commencement of the Amending Act or otherwise.

Changes to Statutory Limitations (Commences 15 January 2015)

Under the current Home Building Act, defects are classified into structural defects (attracting a six year warranty period) and non-structural defects (attracting a two year warranty period).

The Amending Act will amend this regime by classifying defects into two different categories, 'major defects' and 'any other defect'. Major defects (which will be a tighter concept than the previous classification of structural defects) will attract a six year warranty period, while all other defects attract a two year period.

It is expected that fewer defects will be covered by the six year warranty period.

Defence to Statutory Warranties (Commences 15 January 2015)

The Amending Act includes an additional defence for contractors who breach the statutory warranty provisions of the Home Building Act. The additional defence arises where defects arose from the reasonable reliance by the contractor on instructions given by a third party professional (acting for the person for whom the work was done).

Duty of Care (Commences 1 March 2015)

Under the current Home Building Act, a contractor owes a duty of care to the owner of land to carry out all work in a "workmanlike manner". The Amending Act will amend this duty of care so that work is now to be completed with "due care and skill". At this stage, it is uncertain whether this is a higher or lower standard of care for the contractor.

Duty to Mitigate Loss (Commences 1 March 2015)

The Amending Act will require a party who takes the benefit of the statutory warranty (generally the owner of the land) to:

  • mitigate its loss resulting from a breach by the contractor of the Home Building Act
  • make "reasonable efforts" to contact the contractor and notify it of the defect within six months of the defect coming to the owner's attention
  • allow the contractor reasonable access to the property to rectify the defect.

Additional Warnings in Contracts for the Sale of Land (Commences 15 January 2015)

The Amending Act has removed the applicability of the Home Building Act for certain property transactions for which consumer warnings must be inserted into contracts for the sale of land. These include owner builder contracts and contracts for newly excluded buildings (eg buildings which were designed, constructed or adapted for commercial use as tourist, holiday or overnight accommodation).

Strata Schemes (Commences 15 January 2015)

The Amending Act will govern the date for practical completion of residential building work in a new building in a strata scheme. The date for practical completion will be the date that an occupational certificate is issued which authorises the occupation and use of the whole building.

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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