“A little knowledge is a dangerous thing.”
Due in no small part to ongoing education around statutory warranties and defect claims, many strata owners are now aware that the limitation period for bringing a claim for non-major defects typically expires two years after completion of the building works.
However, based on one of the most common questions raised when advising owners corporations, there remains a widespread, and risky misunderstanding:
Many believe that simply providing a defects report or notifying the builder or developer within the limitation period, is enough to protect their legal rights.
Unfortunately, this is not the case.
To preserve an owners corporation’s rights, legal proceedings must be commenced within the applicable limitation period.
Understanding Statutory Warranties
Under the Home Building Act 1989 (NSW), builders and developers provide statutory warranties in relation to residential building work. These warranties broadly guarantee that the works:
- Were performed with due care and skill
- Comply with plans and specifications
- Use suitable materials
- Result in a building reasonably fit for occupation
Where these warranties are breached, affected parties, including owners corporations, may be entitled to bring a claim.
Major vs Non-Major Defects
The distinction between major and non-major defects is critical because it determines the length of the limitation period.
Major Defects
Claims must generally be commenced within six years of completion.
These involve defects in major elements of the building that:
- Are attributable to defective design, materials, or workmanship
- Cause (or are likely to cause) the building to be uninhabitable
- Threaten structural integrity
- Result in building collapse or failure
Non-Major Defects
Claims must generally be commenced within two years of completion.
These may include:
- Waterproofing issues
- Cracking
- Finishes and fit-out defects
- Minor building non-compliances
While labelled “non-major,” these defects can still involve substantial rectification costs.
The Dangerous Misconception
A recurring assumption among strata committees and building managers is:
“As long as we notify the builder before the two years expires, we’re protected.”
This belief often leads to:
- Sending defects reports
- Issuing letters of demand
- Engaging engineers for inspections
- Attempting negotiations
All of which may be prudent steps but none of which stop the limitation clock.
Notification is not the same as commencing proceedings.
Once the limitation period expires:
- The claim may be permanently barred
- Legal remedies may be lost
- Rectification costs may fall entirely on lot owners
Courts apply limitation periods strictly. Good intentions, ongoing discussions, or unresolved negotiations do not extend deadlines.
A Common Scenario
Consider this not-unusual situation:
An owners corporation identifies building defects at around 22 months after completion.
They:
- Obtain an engineering report
- Provide the report to the builder
- Enter discussions
- Await proposed rectification
Time passes.
Negotiations continue.
The builder delays.
The two-year limitation period quietly expires.
At that point, even where defects are genuine and well-documented, the owners corporation may discover:
- They no longer have an enforceable claim.
- This outcome is both financially painful and entirely avoidable.
Why Proceedings Matter
Commencing proceedings within time:
- Preserves legal rights
- Protects the owners corporation’s position
- Prevents claims from expiring
- Creates procedural certainty
Importantly, proceedings can often be commenced while negotiations continue. Litigation and settlement discussions are not mutually exclusive.
Practical Guidance for Owners Corporations
To mitigate risk:
Seek Legal Advice Early
Do not wait until the limitation period is close to expiring.
Understand Completion Dates
Limitation periods are calculated from completion, which is not always obvious.
Coordinate Consultants
Engineers diagnose defects; lawyers protect rights. Both are essential.
Avoid Last-Minute Decisions
Urgent proceedings near expiry dates create stress, cost, and reduced strategic options.
Don’t Rely on Informal Assurances
Verbal commitments or “we’ll fix it” promises will offer no protection once time expires.
The Key Takeaway
Awareness of statutory warranties is a positive development.
But partial understanding, particularly around limitation periods, can expose owners corporations to significant and irreversible risk.
- Identifying defects is not enough.
- Reporting defects is not enough.
- Notifying the builder is not enough.
To protect legal rights:
- Proceedings must be commenced within the limitation period.
When in Doubt, Act Early
If defects are suspected and a limitation deadline may be approaching, obtaining timely legal advice can make the difference between:
or
A Lawyer’s Perspective
This is one of those areas where we consistently see well-intentioned committees caught out, not because they’ve ignored the issue, but because they’ve assumed the process buys them more time than it actually does.
In practice, most claims don’t fall over due to a lack of evidence, they fall over because timing wasn’t managed tightly enough. Once the limitation period passes, even strong claims can become unenforceable.
It’s a technical point, but one with very real financial consequences.
