Liability of Owner Builders without Owner Building Permits

Residential Building work in New South Wales is defined as work in relation to the construction of a dwelling, the making of alterations or additions to a dwelling, o the repairing, renovation, decoration or protective treatment of a dwelling.[1] The Home Building Act (“HBA”) stipulates that residential building work, inter alia, must be performed by suitably licenced contractors, under a written contract if the work exceeds $5,000.00 and must have a complying policy of Home Owners Warranty insurance if the work exceeds $20,000.00.

However, the Act also contemplates work being performed by Owner Builders. Often Owner Builders are not licenced contractors, do not have contracts in writing (with themselves!) and can or do not obtain Home Owners Warranty Insurance. The Act does however require Owners Builders to have a permit to perform residential building work.[2]

This is a significant obligation, because the Act implies statutory warranties[3] that apply to this work which extend to successors in title.[4]

McIntosh v Lennon[5]

 Critical Facts

In late 2012 or early 2013, and in response to a request from his son, the appellant agreed to "pull down the old house" and "build a new house" on that land for his son and his wife. The appellant sought and obtained building plans for the proposed new house and paid for those plans from his own funds. The appellant said he approached a builder for a quote but was subsequently told by this builder that he would not provide a quote due to workload and health concerns but elected to perform the work as an Owner Builder. He did not obtain an Owners Builders permit. The property was later sold, the new Owners identified that the work was defective and sought relief from the appellant for rectification for defective work.

Critical Issue

What is the liability of an Owner Builder who does not have a permit?

Tribunal’s Determination

The Tribunal found that the appellant was an “owner” of the property, was a builder and fulfilled the role of owner-builder, was an unlicensed builder who contracted with the registered owner to build the house on the property, was an owner-builder for the purposes of the HBA, the warranties could be enforced against the appellant either because he was an owner-builder or because he was a builder. As a result the respondents could recover damages against the appellant for breach of the section 18B(1) warranties.

Appeal

The Appellant appealed on a number of basis but relevantly that the Tribunal erred in finding that the Appellant was an Owner Builder.

Appeal Panel Determination

The Appeal Panel determined:-

“In our opinion the proper interpretation of the definition of owner-builder in Sch 1 of the HBA, that is, the legal meaning that should be given to those words as distinct from their grammatical meaning, is that they include owner-builders who do owner-builder work without, in breach of the HBA, being issued an owner-builder permit for that work.”[6]

Summary

The decisions of the Tribunal and Appeal Panel demonstrate that a liberal interpretation of the meaning of an Owner Builder will be adopted. In effect this means that any person performing residential building work will owe statutory warranties for that work including to successors in title. This may have a significant impact on investment renovation and resale and will no doubt the source of further judicial consideration.

Peter Rogers

[1] Clause 2, Schedule 1 to the Home Building Act 1989

[2] Part 3, Division 3 of the Home Building Act 1989

[3] Section 18B of the Home Building Act 1989

[4] Section 18D of the Home Building Act 1989

[5] [2023] NSWCATAP 83

[6] Ibid at 149