Can You Sue Home Builders For Construction Defects?

If you bought a house with building defects, in some circumstances, you could claim against the builder contracted by the previous owner, even if you were never part of the original building contract. This resource explains:  

  • when you may have a claim against the builder contracted by a previous property owner  
  • the time limitation to file a claim against the builder in VCAT  
  • how you can find out who the relevant builder is 

Defective construction works should be charged to the person responsible for it. Issues are unavoidable and can thus cause stress and disappointment along the way. But you should also know that these are just part of the whole construction process. The goal is to oblige the side accountable for the defect to remedy the situation. Usually, the root cause of a construction defect is based on the contracts between the homeowners, contractors, subcontractors, and other people involved in the project.

Legal building liabilities are one’s obligations to such defective works. Construction contracts generally indicate a defects liability period. This part of a contract is intended to repair or rectify defects to be done by the contractor. The defects liability period starts from the exact date of the completion of the construction work and after the maintenance period. Specialist building and construction lawyers of Contracts Specialist can explain these things to you better and in ways, you would understand.

FAQs About Home Builders Construction Defects Law

All domestic building contracts have implied warranties that ‘run with the property. That means that whoever is the property owner can claim against the builder if the builder breached one of the implied warranties of the original building contract – for example, if the builder did not follow plans and specifications or did not carry out the works with reasonable care and skill. The relevant law is set out in sections 8 and 9 of the Domestic Building Contracts Act 1995 (Vic). So, for example, to claim against a builder contracted by a previous property owner: 

  • First, you need to try to resolve the dispute with the builder via the Domestic Building Dispute Resolution Victoria (DBDRV) 
  • If the dispute is not resolved at DBDRV, you must file your claim in VCAT before the limitation period expires. 
  • If you file a claim in VCAT, you will need expert evidence to support your claim.  

Depending on the nature of your claim, the limitation period to file a claim in VCAT is usually ten years from the date your occupancy permit or certificate of the final inspection was issued. However, in some situations, a six-year limitation period applies from the date the contract was breached instead.

It is your responsibility to make sure you file your application at VCAT within your relevant limitation period. You should seek legal advice as soon as possible if you are unsure if the limitation period has expired or if you think it’s close to expiring.

You can ask the person who sold you the property to confirm who built your home. For example, if the seller contracted the builder, they could likely tell you the builder and give you a copy of relevant documents. You should confirm the correct identity of the builder by obtaining and reviewing the following documents that will likely list the name of the builder:   

  • Building permit – if one exists.  
  • Domestic building insurance certificate – if one exists. 
  • Domestic building contract – if you can obtain a copy. 

These documents may be included in the bundle of documents you received when you purchased your home as part of the “section 32 vendors statement” attached to the contract of sale. 

Building Defects And Its Liabilities

Some defects within a constructed or renovated property can be claimed if the defects fall within the six (6) years period upon the completion date. This is according to NSW Home Warranty Insurance. The common complaints about building and construction defects are negligence, breach of contract, breach of warranty, strict liability, and fraud and negligent misrepresentation.

Negligence

When employed by building professionals, the contractor, subcontractor, and developer are required to exercise a reasonable degree of care, skill, and knowledge. Moreover, the contractors are accountable for the negligence of their subcontractors.

Breach Of Contract

If there is a breach of contract, homeowners can sue the builder, contract, or anyone who contributed to the construction work. Such breach is because a person failed to comply with the set plans and specifications stated in the construction contract.

Breach of Warranty

pexels sora shimazaki 5668481Warranty refers to a written guarantee with a specified period. For example, the building contract signed by the builder, and agreed upon by the homeowner, indicates the warranty regarding the property’s condition.

Strict Liability

With strict liability, in homeowner-vs-contractor cases, the homeowner does not need to prove that the contractor was negligent in the construction of the home. However, they are required to prove that the contractor was involved in the mass production of housing, defects in the house exist, created damages due to defects, and caused the defect.

Fraud And Negligent Misrepresentation

Fraud happens when a builder or contractor intentionally misrepresents the quality of construction in false statements. For example, as the project went on, the builder had no intention of complying with the agreed design plans and specifications. In addition, negligent misrepresentation arises when the builder or contractor states something as factual, but there is no reasonable basis for it to be true.

Defects Liability Clauses

In a residential building contract, defect liability clauses may also outline:

  • the scope of defects the contractor is required to remedy;
  • parts of the contract sum retained by the owner as security for the performance of defect rectification work;

procedures for notifying the contractor of defects; and

If the defects liability can be extended.

Defects Liability Period

The contract warranty for a new house is called the ‘defects and liability period’. Generally, the warranty lasts thirteen (13) weeks for a newly finished house. It is better to ask your builder about other important details in some instances. The contract’s content regarding the period covered can vary depending on the agreement.

A well-written letter may be used to send your other concerns to the builder. Keep the copy as proof of your intent. The contractor is always responsible for checking that the construction work is free of major defects for six (6) years, starting from when the work is completed. And two (2) years for all other defects.

Who’s Responsible?

At times it can be tricky to determine who is responsible for building and product defects. This is one of the many reasons why building defects are major sources of disputes for builders and contractors. Sometimes a solution requires lengthy and costly litigation.

Taking Responsibility

In some cases, product defaults may only be evident after some time. For example, once a faulty product has been installed in a person’s home, it may be difficult to establish who is responsible for covering the costs of the repairs.

A building product may be defective for several reasons (e.g. poor quality, incorrect installation, design flaws etc.). Generally, when there is a construction defect, the builder is responsible for remedying the defect at no extra cost to the homeowner. However, this is subject to the statutory defects liability period.

A home builder’s requirement to provide a home that is fit for its purpose is derived from their contract with the owner, statutory warranties and defects liability periods imposed by the Australian Consumer Law. Under the contract between the builder and the consumer, the builder must carry out and complete their works properly and use new building materials following specifications and legal requirements. This ultimately means that the work must be carried out to provide a client with a product that is fit for their purpose.

At common law, the builder will also have the duty to ensure that the building meets a reasonable and safe construction standard. Although there is no common law requirement that the builder must inspect component products for defects, the builder will usually be required to attend and incur the rectification costs before seeking recovery of the costs from the supplier.

A builder will be liable if they knowingly or negligently installed a defective product. However, where a defect arises in a component or material used that the builder could not reasonably have been expected to have known or discovered, it is unlikely that the builder will be held liable.

Your Rights Around Building Defects

Construction businesses must rectify defects in response to any defective claim they make within the insurance period. While some claims processes run smoothly, others do not, calling for a lawyer with construction expertise.

What Did You Need To Know?

Upon entering into your building agreement, your builder, given that they are licensed to complete the work, would have provided you with statutory warranties for the work commissioned. This means that, provided you are still within the warranty period, you are entitled to request the builder fix the defective or incomplete work. However, there are critical periods that you should be aware of that need to be adhered to when it comes to claiming defective building work to ensure your rights to pursue the builder are not lost.

  • Non-completion claims – 12 months from the failure to commence or cessation of the building work.
  • Non-structural defects – 2 years from the date of completion.
  • Structural defects – 6 years from the date of completion.

By seeking legal counsel at the outset of the project, you can ensure that you are covered and don’t miss out on any vital deadlines.

What Should I Do If I Am Served With A Payment Claim?

tingey injury law firm nspj z12lx0 unsplashA party served with a payment claim must respond earlier than what is stated in the relevant contract and fifteen business days from the date of service to provide the claimant with a payment schedule. The payment schedule must both:

  • Identify the payment claim to which it relates;
  • State the amount of the payment, if any, that the party proposes to make; and
  • Suppose the amount proposed to be paid is less than the amount stated in the payment claim, state why the amount proposed to be paid is less, including the respondent’s reasons for withholding any payment. It is important to note that an Adjudication Response is limited to the reasons contained in the payment schedule.

The amount of a payment claim is to be disputed, and a payment schedule must be served within the time permitted under the BIF Act. A failure to do so may result in the party served with the payment claim becoming liable for the whole claimed amount.

What If The Respondent Does Not Serve A Payment Schedule Or Pay An Adjudicated Amount?

Where a party fails to serve a payment schedule in response to a payment claim, the claimant may either:

  • apply directly to the Court for judgment against the respondent for the claimed amount; or
  • proceed with an adjudication application.

Where a claimant decides to proceed directly to Court for judgment, the provisions of the BIF Act prevent the respondent from raising any counterclaim against the claimant or any defence concerning matters arising under the construction contract.

Alternatively, where a respondent is adjudicated to be liable for an adjudicated amount and fails to pay that amount by the date stipulated in the adjudication, the claimant can request a certificate from the adjudicator. This adjudication certificate may then be filed as a judgment for debt and enforced in a court of competent jurisdiction.

What Happens After I Give Notice Of A Claim Of Charge?

The employer is then obliged to hold the monies due by the head contractor to the subcontractor. The subcontractor is then considered a secured creditor. If the employer fails to comply with this obligation, they can be held liable for the amount owing to the subcontractor.

The money held by the building owner may need to be shared between subcontractors if many subcontractors lodge a charge. Within ten business days after the notice of the claim of charge is given to the head contractor, the head contractor must give to the employer and the subcontractor a notice (“contractor’s notice”) that:

  • accepts liability to pay the amount claimed; or
  • disputes the claim; or
  • accepts liability to pay the amount stated in the contractor’s notice but otherwise disputes the claim.

How Can A Contracts Specialist Help You?

We only work on Sydney construction law matters, so you can be confident you are getting the right advice. We will go over your construction contract, investigate if a breach has been made, and see where you stand legally. We work on building dispute cases day in and day out, and we have most probably handled a case with similar circumstances to yours. So we will use our experience and expertise to guide you through the whole legal process. 

Building And Construction

Our building and construction team has a strong reputation within the industry.

What sets us apart is our understanding of the commercial realities of the construction industry, our commitment to our clients, respecting their objectives and appreciating the commercial perspective in dealing with construction matters. We advise building contractors, sub-contractors, engineers, owners, developers, government agencies, investors, and homeowners and bodies corporate in all areas of building and construction law.

We offer clients our sound knowledge and understanding of relevant legislation and practices. Our lawyers are experienced in all areas concerning:

  • Contract interpretation and advice
  • Construction contract negotiation
  • Construction disputes
  • Defective and incomplete building work
  • Strata and body corporate building issues
  • Professional liability and negligence
  • Risk management and due diligence for property development
  • Building dispute resolution
  • Construction litigation
  • Subcontractor’s Charges
  • Payment claims and debt recovery

Our key areas of expertise include:

  • Commercial Construction Disputes
  • Building and Construction Industry Payments Act claims (Qld)
  • Building and Construction Industry Security of Payment Act claims (NSW)
  • Charges under Chapter 4 of the Building Industry Fairness (Security of Payment) Act 2017 (QLD)
  • Claims concerning defective and incomplete work
  • Queensland Home Warranty Scheme
  • New South Wales Home Building Compensation Fund (HBCF)

Conclusion:

Building defects can be major or minor, which, as their names suggest, come with varying levels of complexity when it comes to making a claim. Generally, when there is a construction defect, the builder is responsible for remedying the defect at no extra cost to the homeowner. However, this is subject to the statutory defects liability period. How a claim is settled is up to the parties involved. Although there is no common law requirement that the builder must inspect component products for defects, the builder will usually be required to attend and incur the rectification costs before seeking recovery of the costs from the supplier. While some cases may involve the simple, amicable and timely rectification of a defect, others may involve large compensation payments, expert determination and court proceedings. 

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