Understanding limitation periods for claims of building defects

• Published date: 26 September 2022
• Subject Matter: Real Estate and Construction, Construction & Planning
• Law Firm: Cavell Leitch
• Author: Miss Susan Bevin

Often property owners with defective buildings do not become aware of the defects until well after the work is complete, meaning that limitation issues and the question of when the defects were discovered can arise. But how much knowledge of building defects is considered sufficient for the clock to start on your limitation period?

A recent decision of the High Court, Rea v 360 Degrees Limited [2022] NZHC 916, provides some guidance as to when a building owner will have sufficient knowledge of any defects to trigger the start of a limitation period.

What is limitation?

Limitation periods prevent people from bringing old claims by setting a time period within which claims must be brought. In New Zealand the Limitation Act 2010 deals with acts or omissions that occurred after 31 December 2010 and gives 6 years for most claims to be brought.

There are also some specific limitation periods for certain types of claims, for example claims under the Fair Trading Act must be brought within 3 years of the date the loss or damage was, or should have been, discovered and the Building Act 2004 imposes a 10 year long stop on claims for defective building work.

In situations where there is a delay in people realising they have a claim, common in construction defect cases, the Act provides a late notice period of 3 years from when the claimant knew (or ought to have known) that a claim had arisen.

What happened in this case?

The plaintiffs owned a property in Auckland which suffered from serious building defects. They sued the Auckland Council, claiming it was negligent in processing the building consent, undertaking inspections and issuing a code compliance certificate.

The Council had issued a building consent in December 2012 and a code compliance certificate was issued in October 2013.

The property had been inspected by a building surveyor and the plaintiffs received their report, which identified 31 defects with the property, in March 2015. In March 2016 the plaintiffs received a report from a firm of engineers which also identified structural and weathertightness defects.

In March 2019 the plaintiffs received another report from a different building surveyor which revealed more structural defects and extensive workmanship issues with the property. Whether those defects were the same ones identified in the earlier reports was a point of dispute between the parties.

The plaintiffs filed their claim in September 2021 and the Council sought to strike it out on the...