Defective residential building works - practical guidance

Defective residential building works - practical guidance

Building is not a perfect science and it is common for a homeowner to identify minor defects or variances from plans following completion of construction. Most of the time, if there is something wrong with a new home, the builder will perform remedial work without further charge. This usually occurs with minimal fuss and during the defects liability period under the building contract.

In some cases this rectification process does not go smoothly and a building dispute can follow. These disputes regularly involve a claim by the builder because the homeowner has not paid invoices coupled with a claim by the homeowner that the building works are either incomplete or defective.

Under the Home Building Act 1989 ("HB Act") there are implied warranties in every contract for residential building work. There are a number of warranties including that the work will be performed with due care and skill and that all materials used will be suitable for the purpose for which they are intended to be used.

A claim by a homeowner against a builder will usually be based on a breach of these statutory warranties. Any claim must be commenced by the homeowner within 6 years of the completion of the work, for major defects and 2 years for any other defects.

To determine whether a building has a major defect, a two-part test is applied. Firstly, the defect must be to a major element of the building which means:

  1. an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it (including but not limited to foundations and footings, floors, walls, roofs, columns and beams), or
  2. a fire safety system, or
  3. waterproofing.

Secondly, the major defect must be attributed to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code and that causes, or is likely to cause:

  1. the inability to inhabit or use the building (or part of the building) for its intended purpose, or
  2. the destruction of the building or any part of the building, or
  3. a threat of collapse of the building or any part of the building.

In most cases residential building work will be covered by an insurance policy under the Home Building Compensation Fund. This insurance will not automatically cover defective work and can only be claimed on where the builder has become insolvent during construction, died, disappeared, or has failed to comply with a court or tribunal order to compensate a homeowner.

Although the insurance may not respond as the builder is still solvent, where there are circumstances that may give rise to a claim against the builder, notification to the insurer still should occur as soon as defects become apparent.

As a homeowner if you find a defect in your house, contact your builder and speak to them about it. You should also contact the HBCF provider to notify them of the circumstances that may give rise to a claim.

Builders should proactively communicate with homeowners and work together to rectify defects.

Where the relationship breaks down, both homeowners and builders are well served by engaging quality advisors at an early stage.

PDC Lawyers have extensive experience representing clients in building matters in the New South Wales Civil and Administrative Tribunal (NCAT), Local Court, District Court and Supreme Court. Call us if you need help with a building defect claim.