Buyer Beware: Builders do not owe duty of care to residential apartment owners

On 8 October 2014, in the landmark decision of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36, the High Court of Australia (“HCA”) unanimously found that builders of an apartment complex do not owe a duty of care to owners (including subsequent owners) to avoid causing economic loss resulting from latent defects in the building.

The HCA found that no duty exists because the owners of apartment complexes cannot properly be characterised as “vulnerable”. The HCA found that apartment owners are free to choose their developer, the price they pay and enter into commercial contracts which define the liabilities and risks of the parties. Accordingly, apartment owners are able to protect themselves from incurring such economic loss.

The HCA recognised that original purchasers cannot always check the quality of a builder’s work and rely on the builder to conduct its work properly. However, the HCA did not consider this constituted “vulnerability” in legal terms.

Given that approximately 85 per cent of new apartment buildings are said to contain defects, the HCA’s decision demonstrates that there is a gaping hole in consumer protection laws and a pressing need for new statutory safeguards.

This is especially so in circumstances where the limitation period within which owners corporations can commence court proceedings against builders for breach of consumer warranties is being reduced from six to two years. These new building laws, which commence on 1 December 2014 and are retrospective in action, will only further restrict the ability of apartment owners to seek redress for faults.

If you are or intend to become a residential apartment owner and have concerns about your rights when it comes to defects and faults in your building, please come into our office and speak to one of our experienced solicitors.

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