New Duty of Care may mean extended protection for strata Owners Corporations
Duty of Care and Strata Owners Corporations.
The Government has said that it intends to introduce an over-arching duty of care on the part of ‘building professionals’, to be owed to Owners Corporations.
The current problem is that an owners corporation is a creature of statute. It comes into existence on the registration of the strata plan, and after the common property, which is vested in it, has been built.
The OC is not a party to the building contract and, did not in any real sense, rely upon anyone during the construction process, in relation to the quality of the building work.
The Government’s plans to overhaul its building laws were announced last month and are based on the Shergold Weir report of February 2018.
The High Court, in Brookfield Multiplex Ltd v the Owners Strata Plan 61288 [2014] HCA 36 held that a builder did not owe an owners corporation a duty of care in relation to the quality of the work. In other words, a builder of a strata scheme is not liable to an owners corporation for building defects later found in common property.
Some relief may be available under the Home Building Act 1989 (HBA). Sections 18C and 18D give a successor in title to a person that would have a claim under the HBA, the benefit of the s18B statutory warranties. So, in certain circumstances, an OC may be able to enforce the statutory warranties against the builder and the developer.
Such claims are often thwarted by insolvency, the associated company contracting and a lack of Home Compensation Fund Insurance for buildings over three storeys.
In August 2017 the Government commissioned an independent report into the building industry by Professor Peter Shergold and Bronwyn Weir. Their February 2018 report contained 24 recommendations over ten categories relating to compliance and enforcement systems, including the registration and training of building practitioners, the roles and responsibilities of regulators, the role of fire authorities and inspection regimes.
Implementation of the report recommendations took on further urgency when significant structural defects emerged at the Opal Tower in Homebush on Christmas Eve 2018. Last month, the Government published its response to the Shergold Weir report, indicating that it will support the majority of the recommendations and that four major reforms were to be implemented across the industry.
First, a Building Commissioner is to be appointed to act as the consolidated building regulator in NSW.
Second, compliance reporting is to be overhauled including that designers (including engineers) declare that building plans specify a building will comply with the BCA, and builders declare that buildings have been built according to their plans.
Third, there will be mandatory registration of building designers and builders.
Fourth, the imposition of an overarching tortious liability on building practitioners to owners’ corporations and subsequent titleholders of residential developments, as well as unsophisticated construction clients.’
The imposition of a statutory duty of care will be no easy task. It will involve a significant re-allocation of responsibilities and because there can be no reliance on the builder by the OC the exact nature of the duty of care will require identification.
Currently, the apportionment rules under the Civil Liability Act 2002 do not apply to statutory warranty claims. This may well be problematic because of the number of potential defendants in any case.
An alternative solution may have been to reintroduce the requirement that all dwellings carry HCFI, irrespective of their height. Another may have been to close the loophole whereby a developer can avoid liability under s18C if it did not contract directly with the builder.
In the interim, we await further responses from the Government.
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Clare Peacock is an experienced construction lawyer working on Sydney’s Northern Beaches. Clare provides practical, cost-effective building approval advice to property owners, builders and strata managers. Services include residential building disputes, body corporate issues and strata building problems.