In a recent judgment, the Supreme Court considered a builder’s warranty obligations under the Building Act and a contract for services and found that, unless expressly agreed otherwise, the warranty obligations set out in a contract for building works extend to a person who was not a party to the initial contract, such as the subsequent buyer of a building.
The Supreme Court explained that the owner of a building also benefits from a statutory warranty under the Building Act. If a building contractor includes a warranty in the contract for services, the terms also extend to each subsequent owner of the building or to a third party. The court found that a warranty contract creates an obligation to ensure that works have agreed properties and no defects. The issuance and validity of the warranty do not depend on the contract for services.
This essentially means that a subsequent owner of a building also benefits from the warranty agreed in a contract for services, although the new owner is not a party to the building contract concluded by the former owner (e.g. a developer).