What is a major defect?

The Supreme Court recently considered the meaning of what is a “major defect” for the purposes of the Home Building Act 1989 (NSW)(Act). Stevenson v Ashton [2019][1] was an appeal from the NCAT Appeals Panel.

A major defect in residential building work pursuant to section 18E(4) of the Act means a defect in a major element of a building (attributable to defective design, defective or faulty workmanship, defective materials or a failure to comply with the structural performance requirements of the National Construction Code or any combination of these) that causes or is likely to cause, either:

  1. the inability to inhabit or use the building (or part of it) for its intended purpose;
  2. the destruction of the building (or part of it); or
  3. a threat of collapse of the building (or part of it).

“Major element” means an internal or external load-bearing component of a building that is essential to its stability, a fire safety system or waterproofing.

The Court said that the definition of a major defect should be given a broad meaning. It further held that it was not necessary for the defect to have already caused an inability to inhabit part of the building or created an imminent risk of destruction or collapse of the building in order to amount to a major defect; only that there were reasonable prospects of those consequences to occur. It is not necessary to establish that those consequences are imminent either.

The significance of whether a defect is “major” or “minor” is that for minor defects, owners have only two years in which to make a claim for compensation against the builder while that period is extended to 6 years for major defects.

In this case, Ashton sold her house to Stevenson in May 2016. Ashton had undertaken residential building work to the house in 2014 under an owner-builder permit. The work was completed in May 2014. Less than a month after settling on the purchase of the house, Stevenson noticed a water leak in the ceiling after a heavy downpour of rain. He commenced proceedings in November 2016, arguing that there was significant water penetration into the building from the first floor balcony and that this was a major defect. He also raised other roofing and guttering issues, but these were not considered major defects.

The Court accepted Stevenson’s expert evidence that the balcony membrane was possibly leaking at the junction of the parapet walls and in the expert’s opinion the construction of the balcony did not comply with the Australian standard AS4654.2-2009. Eventually, if the waterproofing to the balcony was not rectified, water penetration would cause the plasterboard sheets in the ceiling below and the joists and timber to rot and decay.

While this case concerned renovations to a single terraced house in Darlinghurst, owners corporations are regarding this case as a win for strata titled buildings because it will make their claims against developers easier. Waterproofing issues are very common in strata titled buildings.

Contact Conditsis Lawyers on (02) 4324 5688 to demystify home building warranty claims.


[1] NSWCATAP 67

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