In a recent matter, the partition of land before it was
subdivided, and the timing of registering strata lots, resulted in
a decision where the owner of the land was not considered to be a
developer under the Home Building Act (the Act). As such, the owner
bears no liabilities regarding statutory warranties in the Act. So
what happened, and what are the lessons to be learnt?
What are statutory warranties?
Statutory warranties are warranties that a person is entitled to
under the contract with a builder/tradesperson. Even if the
warranties aren't written into the contract, under the law they
still apply to the work being done on a home. Statutory warranties
are in effect for six years for major defects and two years for all
other defects, commencing from the date of completion.
The Act states that anyone who is the immediate successor in
title to an owner-builder, a holder of a contractor licence, a
former holder or a developer who has done residential building work
on land is entitled to the benefit of the statutory warranties as
if these parties were required to hold a contractor licence and had
done the work under contract with that successor in title.
What happened in this instance?
In 2007, Trilogy Capital (Cremorne Developments) Pty Ltd (TD)
and Trilogy Capital Services Pty Ltd (TC) bought land in Cremorne
as tenants in common.
Development consent was obtained to build a mix of commercial
and residential buildings. TD contracted with a building and
construction company, Southern Cross Constructions, to undertake
After the Occupation Certificate for the residential work was
issued in October, TD and TC applied to North Sydney Council for
two strata subdivisions, dividing Lot 1 into 7 commercial lots and
Lot 2 into 17 residential lots. Around the same time TD and TC
transferred their respective holdings to each other at the bargain
basement price of $1.00 so TC became the full owner of Lot 1 and TD
owned all of Lot 2. The strata subdivision was registered at the
end of November.
In December strata plans were registered - 79706 for TC's
commercial lots, and 79707 for the residential lots owned by
Work proceeded but things went pear-shaped in 2013 and the
Owners Corporation of the residential lots commenced proceedings in
the NSW Civil and Administrative Tribunal against the builder.
Southern Cross was placed into liquidation so the Owners
Corporation pursued TD as the developer. Unfortunately for the
Owners Corporation, TD was also in trouble and it too went into
liquidation. With only one horse left in the race, the Owners
Corporation went after TC in an attempt to rectify the defective
So who is a "developer"?
According to the Act; an individual, partnership or corporation
is a developer if residential work is undertaken on land they own
– even if they haven't physically been involved in the
development. They are also classified as a developer if the work is
done on behalf of another person - for example, on behalf of a
party to a joint venture agreement with the owner for the
development of the land. The person on whose behalf the work is
actually done is also a developer.
It's important to note that the work undertaken must be done
in connection with an existing or proposed dwelling in a building
or residential development where at least four of the dwellings are
or will be owned by the individual, partnership or corporation.
In this matter, the tribunal had to determine whether TC was a
'developer' within the meaning of the Act and as such
liable for a breach of the statutory warranties. It also has to
establish whether the Owners Corporation was the 'immediate
successor" in title.
The Owners Corporation argued that the residential dwellings
existed by 29 November, 2007 – at which point in time, TC was
still a 25% owner of both lots as tenant in common and as such,
owned four or more of the residential lots.
TC didn't dispute the previous ownership however, said that
by the time the Owners Corporation became successor in title to
whomever owned the residential lots in December, TD was the only
The tribunal member agreed with TC, ruling that statutory
warranties weren't applicable. The Owners Corporation was
unsuccessful in appealing the decision to the Appeal Panel which
reaffirmed the opinion of the tribunal that TC was in fact, not a
developer. The Appeal Panel cited the fact that the strata home
units couldn't be owned until after the strata plan had been
registered and TC was never intended to have any ownership after
this registration had taken place.
Whilst the decision is in no way definitive it may allow
'developers' to argue that they are not bound by the
statutory warranties where there has been a partition of land or a
transfer prior to the registration of the strata plan.
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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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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