One development, two towers and two occupation certificates (one interim and one final): when does the Home Building Act statutory warranty period commence?

Most proceedings brought by homeowners and owners corporations against builders involve a claim for breach of the statutory warranties contained in section 18 of the Home Building Act 1989 (NSW) (HBA).

The HBA statutory warranties, implied into every contract to do residential building work and which are well known to most, can be found here.

Owners have a statutory time limit for commencing proceedings for a breach of a statutory warranty.

Proceedings seeking to invoke the statutory warranties under the HBA must be commenced 'before the end of the warranty period for the breach'. (HBA, s18E(1)(a))

The 'warranty period' is six years 'for a breach that results in a major defect in the residential building work' and two years in 'any other case'. (HBA, s 18E(1)(b)).

A 'major defect' is, relevantly, a defect in a "major element" of the building that is likely to cause the inability to inhabit or use the building, or the destruction or threat of collapse of any part of the building. HBA s 18E(4)(a) See the recent Swaab article here for further discussion as to what constitutes a major defect.

The warranty period starts 'on completion of the work to which it relates...'. (HBA, s 18E(1)(c))

In relation to the construction of a home, which is not a building in a strata scheme, the date of completion occurs:

1. on the date that the work is complete within the meaning of the contract under which the work was done; or
2. if the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose. (HBA, s 3B)

In relation to the construction of a new building in a strata scheme the date of 'completion of the work' is in accordance with s 3C of the HBA, and occurs on 'the date of issue of an occupation certificate that authorises the occupation and use of the whole of the building...'. (HBA, s 3C(2))

Where the work comprises the 'construction of 2 or more separate buildings... the date of completion of that work is to be determined as if there were a separate contract for each separate building ... so that the work for each building will have a separate completion date'. (HBA, s 3C(3))

For this purpose, a building is 'separate' if 'it is reasonably capable of being used and occupied separately from any other building'. (HBA, s 3C(3))

When does the warranty period start for separate buildings constructed as part of a staged development under the same contract?

The NSW Supreme Court recently considered this issue in the matter of The Owners – Strata Plan No 93543 v Zhang (No 3) [2025] NSWSC 571.

The Facts

1. The plaintiff (the 'Owners Corporation') was the owners corporation in respect of a 20-unit development in Hughes Street, Cabramatta.
2. The development comprised two four storey residential apartment buildings constructed over a basement carpark.
3. The front building (Block A) comprised units 1 to 10.
4. The rear building (Block B) comprised units 11 to 20.
5. Block A was built over an underground carpark, accessible by a lift situated on the ground level of Block A and stairs accessible from a courtyard between Blocks A and B. Each of the 20 units include a car space in the carpark.
6. There was a common pedestrian accessway to each of Blocks A and B. The accessway, together with a courtyard and planter box, lay between the two blocks.
7. An interim Occupation Certificate expressed to exclude Units 1 and 10 and "external works" was issued on 13 May 2016.
8. The Strata Plan was registered on 17 June 2016.
9. A Final Occupation Certificate for the whole development was issued on 4 July 2016.

The proceedings were commenced on 24 May 2018 within 2 years of the Final Occupation Certificate, but not within 2 years of the Interim Occupation Certificate.

The developer Mr Zhang contended that Block A and Block B should be treated as separate buildings such that they might have different completion dates and thus separate dates from which the statutory warranty period would commence

Mr Zhang, contended that in relation to defects in Block B that were not 'major' defects for the purposes of the HBA, the proceedings were commenced beyond the expiry of the "warranty period" under the

Held:

The Court held that Block A could not be wholly occupied separately from block B because:

• Block B comprises units 11 to 20, which the Court stated where clearly related to units 1 to 10 in Block A; and
• the underground car park holds the allotted car spaces for all 20 units but can only be accessed via a lift in block A, or a shared courtyard between the blocks;
• The Court concluded that the whole use of Block B depended upon the use of Block A.

Consequently, the Court determined that completion was to be assessed in accordance with section 3C(2), being the date of issue of an occupation certificate for which authorised 'the occupation and use of the whole of the building'.

Section 3C(3) did not apply.

Notwithstanding that Blocks A and B formed separate towers they did so as part of the same structure and accordingly the Court held that the owners corporation had commenced proceedings in time.

For further information please contact:

Mark Glynn, Partner
Phone: + 61 2 9777 8342
Email: mcg@swaab.com.au

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.