In brief - Construction industry professionals and their professional indemnity insurers should consider the impact of the extended limitation period for cladding claims

The Building Amendment (Registration and Other Matters) Bill 2021 (Vic) commenced late last month, which had the effect of introducing a number of amendments to the Building Act 1993 (Vic).

One of the key amendments is that the limitation period for 'cladding building actions' is now extended from 12 years to 15 years. A 'cladding building action' is a claim "in connection with, or otherwise related to, a product or material that is, or could be, a non-compliant or non-conforming external wall cladding product". Notably, this definition is not limited to claims concerning combustible cladding, and ostensibly applies to claims relating to any type of non-conforming external wall cladding.

The Building Act ordinarily allows owners 10 years to bring claims for defective building work (commencing on the date of issue of the relevant occupancy permit or certificate of final inspection). However, amendments were introduced in December last year which extended this period to 12 years for cladding building actions, where the action became, or would have become statute-barred between 16 July 2019 and 1 December 2021 (that is, the occupancy permit or certificate of final inspection was issued between 16 July 2009 and 1 December 2011).

The current amendments now further extend the limitation period to 15 years, where the claim would otherwise have become barred between 16 July 2019 and 1 December 2023. Accordingly, Victorian property-owners whose cladding claims would have been extinguished within his period now have additional time to commence proceedings against builders and other building professionals. The extended limitation period also benefits the State Government by allowing it further time to bring recovery claims where it has paid for cladding rectification works as part of the Cladding Safety Victoria program.

Main takeaways for construction professionals and their insurers

This is a troubling development for building professionals and their professional indemnity insurers, as building owners and the State Government (where it is completing rectification works) now have a further three years in which to bring their claims. In fact, certain claims that were previously technically out of time have now been resurrected by these legislative changes.

Most construction professional indemnity policies now exclude combustible cladding claims. However, before these exclusions were introduced many professionals submitted blanket or bulk notifications of projects with combustible cladding. 

Unfortunately, if building professionals only notified projects that were completed within the previous 10-year limitation period, there is the potential they may not be covered for claims which now have the benefit of this extended limitation period.

Construction professionals whose insurance cover is in 'run-off' would also be wise to review their insurance arrangements.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2021.

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