Occupancy permits – the ticking clock in defective building work

Where multiple occupancy permits are issued in relation to a building permit, which permit is the operative permit for the purpose of determining the limitation date?”

Section 134 of the Building Act 1993 provides that 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 (whether or not the occupancy permit is subsequently cancelled or varied).

In some developments, building works are completed in stages under different building permits.  A building permit will identify if an occupancy permit is required for the whole of the building or a part of the building.  In the latter case, this means that multiple occupancy permits may be issued.  This begs the question “Where multiple occupancy permits are issued in relation to a building permit, which permit is the operative permit for the purpose of determining the limitation date?”

The Supreme Court of Appeal considered this issue in Lendlease Engineering Pty Ltd v Owners Corporation No 1 [2022] VSCA 105 (Lendlease) and decided in favour of Lendlease, which contended that “time must commence to run from the date of issue of the permit that relates to the building work the subject of complaint in the building action.”  The point to note is that the limitation date connects to the building work said to be defective in the proposed building action.

Where multiple occupancy permits are issued for the same stage, each successive permit may restate the works listed in the earlier occupancy permits plus some additional works.  In this case, a different limitation date arises only for the additional works, with the limitation dated for the restated works remaining as already determined.

For example: in Lendlease, the building works were completed in separable portions under six building permits and four occupancy permits issued.  Only the third and fourth occupancy permits were relevant to the dispute between Lendlease and the Owners Corporation, which involved a claim by the Owners Corporations that the sunshade louvre system was defective in building 2 of the development.

The third occupancy permit dated 6 December 2006 (OP3) “certified that, amongst other things, all apartments (and associated common property) were suitable for occupation excluding:

(i) Apartment Levels 7, 8 and 9 and Apartments G10, 210, 410 and 610 of Building 2; and

(ii) Apartments G04 and G05 of Building 1.”

The fourth occupancy permit dated 16 February 2007 (OP4) “certified, that, amongst other things, all apartments (and associated common property) of both Buildings 1 and 2 were suitable for occupation.”

The Owners Corporation filed its claim 13 February 2017.

The defective louvre system was located in Building 2.  Notably OP3 certifies all private lots and common property in Building 2 except “Apartment Levels 7, 8 and 9 and Apartments G10, 210, 410 and 610 of Building 2”.  The latter exceptions were certified under OP4.  Therefore, the limitation date for most of building 2 (as certified under OP3) was 5 December 2016.  As a result, that part of the Owner’s Corporation claim that related to the defective louvre system in those areas were struck out as they were brought more than 10 years after the date of 5 December 2016.  Only the excepted areas, which were certified under OP4 were  not statute barred as their limitation dated was 15 February 2017 (being 2 days after the proceeding was commenced).

If your Owners Corporation is considering action against a building practitioner, it is important to identify the first occupancy permit that is relevant to the allegedly defective building work as this will determine the limitation period in which a legal proceeding may be commenced.

For advice or assistance, please contact Anoinette or our owners corporations team here.