In the recent case of The Owners – Strata Plan No 66375 v King  NSWCA 170 the NSW Court of Appeal ruled that immediate subsequent home owners are able to enforce statutory warranties against developers under s18C of the Home Building Act 1989. In this case, the Kings contracted with Beach Constructions to build a residential and commercial strata development on their land, but after residents moved into the buildings various defects were found, including missing seals on elevator doors and other fire and safety defects. These were not a result of the builders work, but rather design flaws that the builder had followed.
The Owner’s Corporation brought a claim against the Kings and Meridian Estates, a company of which the Kings were the sole directors. On first instance, the primary judge held the Kings were not developers because only Meridian Estates was party to the contract, however the Court of Appeal overturned this decision and ordered a judgement of over $5 million against the Kings. The court held that the Kings fell within the definition of developers and that the warranties guaranteed under s18C were designed for situations like these, where immediate subsequent purchasers could seek compensation from the person responsible for the defective work where there is no direct legal relationship.