IS YOUR apartment a home? You might think the answer is obviously positive, yet the question required determination in the Supreme Court of Victoria in a dispute between the builder of a 67 residential apartment development and the Owners Corporation (as legal owner of the common property).
The reason why the case is significant is because the Court decided that the Domestic Building Contracts Act 1995 (Vic) (Act) applies to multiapartment residential developments. Absent the Act applying to the construction of multi-apartment residential developments, owners, subsequent owners and their Owners Corporation would not have the benefit of implied warranties under Section 8 of the Act, which is usually relied on in a claim for defective building works in the Victorian Civil and Administrative Tribunal (VCAT).
The Owners Corporation of the apartment complex in Maribyrnong issued a proceeding in VCAT against the builder, Burbank Australia Pty Ltd, alleging that defective building works in the common property were subject to implied warranties under s8 of the Act. The Owners Corporation further alleged that it was entitled to the benefits of the warranties as provided under s9 of the Act.
Burbank sought to have the VCAT proceeding struck out on a number of grounds, including that the Act does not apply to developers. As VCAT dismissed Burbank’s application, it appealed to the Supreme Court. One of the questions to be determined was whether the Act has any application to multiapartment residential developments.
The process for reaching its decision that the Act does apply to multi-apartment residential developments involved careful consideration by the Court of both the literal words used in the Act and the purpose of the Act.
Many of the relevant sections examined by the Court, used the word ‘home’ which is defined in the Act as ‘any residential premises and includes any part of a commercial or industrial premises that is used as a residential premises’. The definition also contains a list of exclusions (e.g.; motel, nursing home) and the Court observed that a residential apartment in a multi-apartment development did not appear in this list.
Sensibly, the Court considered that alienating an owner of a residential apartment from the benefit of the Act would create two classes of residential premises, namely a stand alone dwelling house and a residential apartment. The Court decided that this outcome would not promote the overriding purpose of the Act to protect consumers.
The Court also reflected on the fact that builders are exempt from the requirement to take out warranty
insurance on a multi-apartment residential development concluding that such exemption is premised on such ‘homes’ being entitled to the benefit of the Act.
As a secondary finding, the Court also decided that the Act applies to developers where the nature of the building works involves construction of a multiapartment residential development. In resolving the question as to whether the Act has any application to a developer, the Court said that referencing the question to the identity of the contracting party is misconceived. Rather, the enquiry should be focused on the nature of the work undertaken and determining whether such work falls within the scope of the work covered under s5 of the Act.
- The Act applies to multi-apartment residential developments.
- Developers, owners, subsequent owners and Owners Corporations of such developments are entitled to pursue their claims under the Act for defective works (subject to the 10 year limitation period).
- Builders should ensure that their construction contracts for multi-apartment residential developments comply with the Act.
As to whether the Act applies to a development with mixed use (residential and commercial) remains
unclear. Based on this and other decisions, one might expect that the Act could only have application to those parts of the development that have residential use.