Leaky building pitfalls and time limitation [May 2009]

Any home owner affected by potential weathertightness problems, or any other problems with building work that may need to be addressed through litigation, should be conscious of the need to move quickly to protect their interests if they do not want to risk losing their right to seek redress against the parties who they consider may be responsible. The likelihood of being able to recover from the parties involved in the construction will decrease with the passage of time as companies are put into liquidation and people disappear. There are also various legal limitation periods that apply, and the clock will start ticking even though you may not even be aware that there is any problem.

You should also be aware that formal steps need to be taken to stop the clock (which will differ depending on whether you bring a claim in Court or in the Weathertight Homes Tribunal), and it is not enough just to put someone on notice that you intend to make a claim. You could still find yourself out of time even if you had been corresponding or negotiating right up to the deadline.

Under the Building Act 2004, there is a 10 year limitation period which provides the ultimate "backstop" for any claims relating to building work. The time will start to run as against various parties, at different times, depending on when each party was involved in the construction. The last in line is usually the Council on the basis of its final inspections and issue of a code compliance certificate. Until recently, so long as you were in time to claim against any party (often the Council), that party could join in other respondents even though their involvement was outside the 10 years. However, this issue has been the subject of a recent High Court decision in Davidson v Banks that confirms that the 10 year limitation period applies to all proceedings, including "third party" claims.

This decision will be good news for builders or subcontractors who have found themselves dragged into proceedings as much as 11 or 12 years after they had any involvement with the building, however, it will not be a positive development from the perspective of local authorities, who will have fewer available parties to contribute to settlement of claims. Similarly, from the perspective of home owners who are close to the 10 year limitation period, this may limit their ability for recovery. If they were unlucky enough to have a private building certifier carry out inspections of their property, then they may not even be able to claim against the Council, and may find that the certification company is in liquidation and the certifier has gone overseas.

The 10 year period is the backstop, however, a shorter limitation period can apply that can mean that you are out of time after as early as 6 years, even if you did not actually know about the problem. The Courts have developed a concept of "reasonable discoverability", which determines when the 6 year period starts to run. In other words, the time period does not begin until the point in time that the leaky problem ought to have been apparent to a reasonable home owner. However, there will undoubtedly be room for argument in most cases. The point for homeowners is that if you think you may have a problem, do not ignore it, and act quickly.

If you do find yourself out of time to bring a claim, or if you do not want to go to the expense or trouble of legal proceedings, do not try to cover up or conceal the problem. If you sell a property with knowledge of defects and try to conceal this in any way or make any false statements about the property, then you run the risk that you will find yourself on the receiving end of a claim down the track from the subsequent owner.

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