Staged developments and permits – for how long is a contractor liable?

Jul 14, 2022

Last month the Court of Appeal handed down its decision in Lendlease Engineering Pty Ltd v Owners Corporation No 1 [2022] VSCA 105 (Lendlease), confirming when the ‘clock starts’ for the 10-year limitation period provided under s134 of the Building Act 1993 (Vic) (the Act).

Section 134 provides that a building action cannot be commenced more than 10 years from the date of the occupancy permit in respect of the building work (the controversy over whether it was 10 or 6 years having been put to rest by the Court of Appeal’s 2014 decision in Brirek).

It is particularly important to owners and builders to a domestic building contract as it sets the outer boundary of the builder’s warranty under section 8 of the Domestic Building Contracts Act 1995.

However, for multi-stage building projects that involve a series of occupancy permits, there has been some debate as to when the 10-year period commences. Is it from the date of the final occupancy permit on the project? Or the date of the first occupancy permit relevant to the particular building works in question?

The Lendlease decision overturns an earlier decision of the Supreme Court of Victoria which said that where multiple occupancy permits are issued in relation to the same building work, it is the date of the final occupancy permit from which the limitation period under s134 commences.

That is no longer the case. The limitation period under s134 of the Act will commence from the date of the first occupancy permit in relation to the specific building works in issue.

In practical terms, this will mean that where the same building works are the subject of more than one occupancy permit on a project, it will be the date of the first occupancy permit affecting those buildings works that triggers the limitations period under s134.

The Court found that this approach provided the most certainty of time limits and supported the intention of the drafters when the legislation was enacted.

Claimants will need to carefully assess which occupancy permits apply to alleged defects before commencing any action to avoid potentially being statute barred.

It will also be important for contractors to maintain concise records of the occupancy permits issued in respect of their work (including to what stage of works each permit relates) so they can be called up and relied upon to defend an action brought out of time.

If you would like to discuss how your building work may be impacted, please reach out to Peter Lettieri or Jessica Seferis on +61 3 8825 4800.