Home Improvement – Homeowners’ Obligations When Undertaking Building Work and Statutory Protections for Subsequent Owners

Commercial, Property

While ‘do-it-yourself’ home improvements can be exciting and costs saving projects, they can also lead to unforeseen problems that can have significant effects on the sale of a property and leave vendors open to potential claims long after the property is sold. Conversely, purchasers should be aware of what remedies are available if defects become apparent.

Renovation projects – are they residential building work?

Renovations or home improvements need to satisfy certain requirements to be deemed “residential building works” under the Home Building Act 1989 (NSW) (the HBA). If so, those works and any related disputes will be regulated by the HBA.

Subsequent owners will also be afforded the consumer protections available under the HBA in limited circumstances.

What is “residential building work”?

“Residential building work” means any work involved in the construction, alteration, addition, renovation, repair, decoration or protective treatment of a residence or any part of a residence. A residence can include a detached or semi-detached house, transportable house, terrace or town house, duplex, villa-home, strata or company title home unit or residential flat.

Some works are excluded from “residential building work” meaning the HBA won’t apply. Some common examples are work where the reasonable market cost of the labour and materials does not exceed $5,000 (other than specialist work), internal painting that is not related to a contract, flooring (except for tiling) which does not structurally changes to the floor and demolition work.

Specialist work includes things like plumbing and drainage work (other than roof plumbing), gas fitting, electrical wiring and any work declared by regulations such as refrigeration work or air-conditioning work.

It is an offence under the HBA to carry out unlicensed or unqualified residential building work or specialist work.

What are Statutory Warranties?

Builders (including owner-builders and subcontractors) owe Statutory Warranties with respect to any residential building work. These warranties arise under the HBA and are implied in every contract to do residential building work.  They include warranties such as that the work will be performed in a proper and workmanlike manner, that the materials used will be fit for purpose and that the work done will comply with applicable laws.

Statutory Warranties are ordinarily owed for 6 years after the completion of the work with respect to a structural defect, and 2 years for any other defect.

Do Statutory Warranties in the HBA apply to renovation projects?

Under section 18C of the HBA, an owner who has purchased a defective dwelling can still claim losses for breach of Statutory Warranties against certain classes of people even though no building contract exists. These are known as “notional contracts” which creates a right for successors in title to recover from owner-builders, holders of contractor licenses (and former holders of a contractor licenses) or developers who have undertaken residential building work.

Buyer Beware! – Statutory Warranties may not apply where unlicensed tradespeople or home renovators have carried out works themselves.  

In Carr v Miller (2018) NSWSC 1424 the initial owner of a property allowed his son-in-law to redevelop a house by carrying out extensive building work. The son-in-law was not licensed and the works were defective. The subsequent owner tried to bring a claim against the son-in-law and previous owner for breach of statutory warranties under the HBA but failed because no building contract could be identified and because neither people fell within the classes specified in section 18C of the HBA. As set out above, section 18C of the HBA only applies if the work was done by owner-builders, holders of contractor licenses (or former holders) or developers.

Ultimately, the subsequent owner was successful on other grounds, notably because sham home warranty certificates were furnished to effect the sale of land which was subject to and conditional upon the owner evidencing all building works were covered by home warranty insurance policies.

While Carr v Miller exposes limitations of the HBA, there may be other recourse for aggrieved owners who are unable to recover under the HBA. For example, the relatively recent enactment of the Design and Building Practitioners Act 2020 (NSW) affirms that a  duty of care is owed to owners by people carrying out “construction work” to exercise reasonable care to avoid economic loss caused by defects. Importantly “construction work” includes residential building work as defined in the HBA but also extends a much broader meaning giving consumers some comfort.