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Landmark Decision - Councils cannot escape liability for building defects

Home > Publication > Case Studies > Landmark Decision - Councils cannot escape liability for building defects

Defect claims are always complex and nuances reign supreme.  In a recent case Grace Lawyers have successfully argued for an Owners Corporation of a small residential strata scheme that a Council is a developer The Owners – Strata Plan No 151721 –v- Lane Cove Council

Brief Background

Council had owned the land upon which the building was constructed.  Council engaged a builder to construct the building and approved the development itself.  After registration of the strata plan, Council sold the lots in the strata scheme to various home owners.  In the various contracts for sale, Council conceded that it is a developer for the purposes of the Home Building Act.

A few years after the building was completed, the owners became aware of defects affecting the common property.  The Builder became insolvent.  The Scheme brought a claim against Lane Cove Council for numerous building defects as developer.  Council argued that it was not a developer under the warranties implied by the Home Building Act 1989 (NSW).  These warranties included warranties that the building be constructed in a proper and workmanlike manner, using materials which are fit for purpose.

Council argued that it is not an “individual, a corporation or a partnership” as defined in the Home Building Act.  Instead, Council argued that it is a “body politic” and so, fall outside the definition of a developer for the purposes of the statutory warranties.

The decision

This matter came before a Senior Member of the NSW Civil and Administrative Tribunal, who found in favour of the Owners Corporation and dismissed Council’s argument, with an order that Council pays the Owners Corporation’s costs of that hearing. 

The effect is that where a Council acts as a developer it cannot claim that it is not a developer for the purposes of the Home Building Act 1989 (NSW).