The Home Building Act 1989 (NSW) (‘the Act’) governs the performance of residential building work and the regulation of residential building disputes in New South Wales.
Who is a developer
It is important that developers understand their obligations in relation to residential building work under the Act. Section 3A defines a ‘developer’ as an individual, partnership or corporation who owns, or will own, at least four of the dwellings in an existing or proposed residential development following its completion. This also makes the landowner a developer, even if the residential work is done on behalf of another person. For example, where one party to a joint venture agreement is the owner for the development of the land, the other party is also a developer in relation to the work.
A developer who falls within this definition will owe statutory warranties to the subsequent purchasers of the property, and their successors in title, during the warranty period. Owners can rely upon these warranties to make a claim against a developer in cases of defective building work.
In order to avoid falling within the definition of ‘developer’ set out in the Act, developers should be aware that their intention in building and development is critical. They would need to demonstrate that it was never their intention to own four or more of the proposed dwellings following their completion.
For example, a developer sells all of the proposed units in a development off-the-plan prior to the registration of the strata plan. The off-the-plan sale of the units would support the developer’s position that they never intended to own any of the dwellings following their completion. In doing so, they would not fall within the definition of ‘developer’ under the Act and therefore may avoid liability for breach of statutory warranties.
However, if a developer was unable to sell or otherwise market all of the units off-the-plan and was subsequently left with four units in their ownership following the registration of the strata plan, they would fall within the definition of ‘developer’ under the Act. In doing so, they would owe statutory warranties to the purchasers of all units in the development, including the units that had been sold off-the-plan prior to completion.
Developers are therefore advised to be aware of their obligations under the Act during the development process to ensure they are not liable for these statutory warranties on completion.
Keystone Lawyers can assist by providing advice to developers regarding their rights and protections when developing residential developments.