Limitation periods for building actions

As with other civil claims, causes of action in relation to building work are subject to limitation periods which limit the time in which these claims may be commenced.?Limitation periods may seem straightforward, however in practice can be subject to a number of complications.

This article considers limitation periods in the context of claims for building work in Victoria, and answers some common questions that arise in practice.

What are the limitation periods under the Building Act 1993 (Vic)?

In Victoria, the statutory limitation period in which a party must commence a building action is prescribed by the Building Act 1993 (Vic) (Building Act).?A ‘building action’ cannot be brought more than 10 years after the date of issue of the occupancy permit in respect of the building work or, if an occupancy permit is not issued, the date of issue of the certificate of final inspection of the building work (section 134(1) of the Building Act).?

However, section 134(2) allows for an extended limitation period for building actions related to non-compliant cladding products which would have otherwise expired on or after 16 July 2019 but before 1 December 2023, providing that these actions can be brought more than 10 years but less than 15 years after the issue of the occupancy permit or certificate of final inspection.

What building actions do these limitation periods apply to?

A ‘building action’ is defined in section 129 of the Building Act as an action for damages for loss or damage arising out of or concerning defective building work. This definition also explicitly includes a counterclaim as a building action for the purpose of the limitation periods.

The definition of ‘building action’ in section 129 of the Building Act is intentionally broad so as to capture a wide variety of claims.[1]

Although most domestic building disputes must first be referred to the Domestic Building Dispute Resolution Victoria (DBDRV) before commencing an action in the Victorian Civil and Administrative Tribunal (VCAT), an application to the DBDRV is not considered the commencement of a building action for the purpose of the 10 year limitation period, and will not prevent time from running out.[2]?

Further, it may not be possible to join parties to a proceeding after the expiry of the 10 year period, as joining new parties after this time may be considered commencing a new action outside of the limitation period.[3]

Do other statutory limitation periods still apply?

Outside of the Building Act, the Limitation of Actions Act 1958 (Vic) (Limitation of Actions Act) imposes a limitation period of six years for causes of action in contract or tort from the date on which the cause of action accrues. Under these provisions, a cause of action in, for example, negligence, may only accrue when the claimant becomes aware of the damage suffered by the negligence, which could be many years later.

The Court of Appeal has confirmed that section 134 of the Building Act creates a separate limitation period in respect of building actions and overrides the six year limitation period set out in the Limitation of Actions Act, and instead imposes a 10 year limitation period for all building actions, including those in contract and tort.[4]

Accordingly, a claim for defective building work must be brought within 10 years of the date of issue of the occupancy permit or certificate of final inspection of the works, even in cases where there are latent defects that are not realised until a much later date.??

In cases where a building permit was not obtained and there was no occupancy permit or certificate of final inspection issued for the building works, section 134 of the Building Act will not apply. Rather, the relevant limitation period set out in Limitation of Actions Act would apply.[5]

Which occupancy permit starts the clock on the limitation period?

In cases where multiple or staged occupancy permits are issued for a building project, the Supreme Court has found that the relevant occupancy permit issue date for the purpose of section 134 of the Building Act is the date of the occupancy permit which “best reflects the whole of the work in the building”, and not the date of the occupancy permit that first identifies the allegedly defect building work which is the subject of a claim. [6]

Therefore, the clock starts ticking on the limitation period for building actions from the date of issue of the final occupancy permit issued in respect of the entire building project.

Conclusion

It is essential to be aware of the relevant limitation periods for building actions before commencing proceedings because time frames are strict.?To avoid your claim being statute-barred, it is critical to file any application in the VCAT before the expiry of the 10 year period.?If an action is not commenced within the relevant limitation period, in most cases the claimant will be out of time to bring this action and the claim will be stature barred.

[1] Bandelle Pty Ltd v Sydney Capitol Hotels Pty Ltd (2020) 246 LGERA 159; Mason v Fraser [2021] VSC 461.

[2] Owners Corporation 1 Plan No PS543073S v Eastrise Constructions Pty Ltd (Building and Property) [2019] VCAT 1639.

[3] See, for example, Lendlease Engineering Pty Ltd v Owners Corporation No 1 & Ors [2021] VSC 338.?

[4] Brirek Industries v McKenzie [2014] VSCA 165, [135] Redlich, Whelan and Santamaria JJA.

[5] See Gledhill v Scotia Property Maintenance Pty Ltd [2019] VCAT 422.

[6] Lendlease Engineering Pty Ltd v Owners Corporation No 1 & Ors [2021] VSC 338.