What Counts as a Major Defect Under the Home Building Act 1989 (NSW)

What it is

The major defect concept in New South Wales does more work than in any other state. It fixes which warranty claims get the 6 year period under section 18E(1)(a) of the Home Building Act 1989 (NSW) and which get the 2 year period under section 18E(1)(b). The line runs through section 18E(4), which supplies a statutory definition rather than leaving it to industry practice.

That matters because the periods are unforgiving. Section 18E(6) adds a 6 month tail where the breach becomes apparent in the last 6 months, but there is no general power to extend on hardship or on late-discovered defects. Whether a defect is major or not is the difference between a live warranty claim and a barred one.

The section 18E(4) definition

A major defect under section 18E(4) means a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause, one of the following:

• the inability to inhabit or use the building (or part of the building) for its intended purpose
• the destruction of the building or any part of the building
• a threat of collapse of the building or any part of the building

Section 18E(4)(b) adds a separate limb: a defect of a kind that is prescribed by the regulations as a major defect.

Section 18E(4)(c) adds a third limb: the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act.

What is a "major element"

Section 18E(5) defines a major element of a building to mean an internal or external load-bearing component of the building that is essential to the stability of the building, or any part of it (including foundations and footings, floors, walls, roofs, columns and beams). It also includes a fire safety system, and waterproofing.

The load-bearing test does most of the work in practice. Non load-bearing internal walls fail the test even where the defect is significant. Load-bearing external walls, roof structures and slabs meet it comfortably.

Fire safety and waterproofing are treated as major elements regardless of whether they are load-bearing. That extends the 6 year window to defects that would otherwise fall inside the 2 year category on a strict structural reading.

The prescribed external cladding regulation

Regulation 26A of the Home Building Regulation 2014 (NSW) prescribes external cladding as a major defect where the cladding is a combustible external cladding on a building rising two or more storeys above ground level. That prescription attaches to the section 18E(4)(b) limb and gives combustible cladding claims the 6 year warranty period regardless of the load-bearing analysis.

Building Products (Safety) Act 2017 banned products

The Building Products (Safety) Act 2017 (NSW) bans certain building products from use. Use of a banned product is treated as a major defect under section 18E(4)(c). Aluminium composite cladding above certain fire performance thresholds is the paradigm example.

Why the definition matters

The 6 year and 2 year periods run from completion of the work. A defect notified inside the section 18E period gives the owner a live warranty claim under section 18B. A defect notified outside it is barred, subject only to the section 18E(6) 6 month tail where the breach becomes apparent in the last 6 months.

Section 18BA reinforces the point. The owner has a duty to notify the builder in writing of a breach of a statutory warranty within 6 months of the breach becoming apparent, and must allow the builder reasonable access to rectify. A defect argued as major that is actually non-major, notified in year 3, fails on limitation even where the workmanship point would otherwise succeed.

How NSW compares

NSW is the only state that runs the major defect concept as a statutory definition with a load-bearing test plus prescribed extensions. Queensland's section 29 of Schedule 1B of the QBCC Act uses the phrase "structural defect" without statutory definition, leaving it to QBCC guidance. Victoria has no equivalent split. The ACT uses "structural" and "non-structural" without an equivalent statutory definition. South Australia has a flat 5 year period with no split at all.

The NSW definition is worth reading in the original because a mischaracterisation costs the difference between 6 years and 2 years, and the section 18E limits are strict.