The typical stages of a building defect claim
Notification of the Defects
The first step usually involves notifying the building professional or developer of the alleged building defects. In particular circumstances you must do this within 6 months of becoming aware of the alleged building defects. We discuss below some of the risks of resolving a dispute without obtaining legal advice.
Complaint to Office of Fair Trading
If the building professional or developer do not agree to rectify the alleged building defects you ought to consider making a building complaint to Office of Fair Trading and seek to obtain a rectification order.
A rectification order may not be appropriate in all cases (i.e. the rectification order may not extend adequately, or at all, to the alleged defects, where the builder is not licensed or where a statutory warranty period is about to expire).
Commencement of Tribunal or Court Proceedings
Proceedings can be commenced seeking a remedy for you, including for breach of the statutory warranties implied in building contracts under the Home Building Act 1989 (NSW). Depending on the amount claimed by you, the proceedings may be commenced in the New South Wales Civil & Administrative Tribunal (NCAT), the District Court of New South Wales or the Supreme Court of New South Wales.
Disclaimer : This guide constitutes a summary of the information of the subject matter covered. This information is of a general nature and should not in any way be construed as legal advice.
The short answer is, it’s smart not to.
When trying to settle a building defects claim, savvy building professionals and developers will endeavour to obtain a release from the owner from future claims. Any form of release should be carefully considered by your legal representative for a number of reasons including that:
- you may be cutting short time remaining under the various statutory warranty periods;
- some defects may not have materialised (i.e. latent defects); and
- nearly always you will be forgoing your rights to a remedy (or remedies) you are entitled to.
Depending upon the facts and circumstances of each case, there are number of causes of actions that you may have against a building professional or developer including but not limited to breach of contract, breach of the statutory warranties under s 18B of the Home Building Act 1989 (NSW), breach of duty of care or misleading and deceptive conduct pursuant to s 18 of the Australian Consumer Law.
Contact us today to find our whether you may have a claim against a building professional or developer. Time limitations apply to the potential causes of action. If proceedings are not commenced within time under law, you may be out of time from prosecuting that cause of action.
Broadly speaking, a defect must result from defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code.
Under the Home Building Act 1989 (NSW), there are two types of defects, major defects and non-major defects.
In 2015, the concept of ‘major defects’ was introduced into the Home Building Act 1989 (NSW) and replaced the concept of ‘structural defects’. Section 18E of the Act defines “major defect”.
A two-step test will determine if a defect is a major defect. To be considered a major defect it must meet the criteria of both the first step and then the second step. The first step is whether the defect was in a major element of the building.
The second step considers the defect’s potential consequences.
A non-major defect is any other defect that arises other than normal wear and tear.
Determining whether an alleged defect is a major or non-major defect is a mixed question of fact and law.
Please contact us to see how we can assist you identify alleged defects in your building and how to make the building professional and/or developer accountable to rectify those alleged defects.
In NSW every building contract to do residential building work will contain the statutory warranties set out in section 18B of the Home Building Act 1989 (NSW). They apply in relation to every building contract where the value of the work is over $5,000 (for contracts entered into after 1 March 2015).
The statutory warranties only apply to residential work as defined in clause 2 of Schedule 1 to the Act.
The statutory warranty periods
For building contracts entered into after 1 February 2012, there are 2 statutory warranty periods: For major defects, the warranty period is 6 years. For non-major defects, the warranty period is 2 years.
For building contracts entered into before 1 February 2012, the statutory warranty period is 7 years.
When do the statutory warranty periods commence?
Generally speaking the statutory warranty period commences from the date the residential building work is completed.
For owners corporations, section 3C of the Home Building Act 1989 (NSW) provides that the date of completion for new buildings is the date of issue of an occupation certification. There may be different dates of completion for different parts of the building, and there may be various occupation certificates issued (including interim occupation certificates).
Ascertaining the date of completion of a new building in a strata scheme is not straightforward and you should obtain legal advice to ascertain the applicable limitation periods under the Act.
For other work, completion will generally be determined by reference to the building contract under which the work was done. The Act provides guidance as to when completion occurs when the building contract does not.
Please contact us if you require advice in ascertaining when the building work is deemed to be complete and the timing of limitation periods under the Act.
Part 6 of the Home Building Act 1989 (NSW) provides that, subject to the qualification below, insurance [which ought to be obtained by the builder prior to commencing the residential building work] is required for any residential building work over $20,000. This is known as insurance under the Home Building Compensation Fund.
If the building being constructed is over 3 storeys, then there is no requirement to obtain insurance under the Home Building Compensation Fund.
A claim under the Home Building Compensation Fund can only be made where the builder is dead, insolvent, has disappeared or where the builder has not paid a monetary order.
There are three periods of cover under the Home Building Compensation Fund:
- For a claim concerning incomplete work – 12 months;
- For a claim concerning major defects – 6 years; and
- For a claim concerning minor defects – 2 years.
In certain cases, a claim can be made after the period of cover has expired, provided proper notification of the claim is provided to the insurer within the period of cover. A claim must be made within 10 years of the date of completion of the residential building work.
The type of evidence required in each set of proceedings depends on the facts and circumstances of each case.
There are two classes of evidence; lay and expert evidence.
Such evidence usually takes the form of an affidavit or statutory declaration and is generally provided by the property owner going to, amongst other things, the engagement of the building professional and conduct of the building professional throughout the project, when the alleged defects became apparent to the property owner, the building professional’s and/or developer’s conduct leading up to the commencement of the proceedings.
Such evidence usually takes the form of an expert report and is generally provided by a suitably qualified professional who, amongst other things, typically:
- Identifies the alleged defects;
- Provides expert opinion as to the likely cause of the alleged defects;
- Provides expert opinion on the alleged breach of the statutory warranties in relation to each alleged defect;
- Provides expert opinion on the preferred course of rectifying the alleged defects; and
- Provides expert opinion on the costs of the rectifying the alleged defects.
There are certain technical requirements in obtaining expert evidence. If expert evidence is not obtained in accordance with those requirements, it may be inadmissible or even prejudicial to your claim.
Depending on the case, evidence may be required from more than one expert (i.e. a building professional, an engineer and/or a quantity surveyor).
The success of your claim is dependent upon, in particular, the quality of your expert evidence.
Please contact us to discuss how we can assist you prepare and obtain the evidence required to give you the best chances of winning your case.
The New South Wales Civil and Administrative Tribunal (known as NCAT) can hear and determine applications lodged by property owners, owners corporations and insurers about residential building work up to $500,000 under the Home Building Act 1989 (NSW).
If the quantum of your claim exceeds $500,000 then you may have to commence proceedings in the District Court of NSW or if in excess of $750,000, the Supreme Court of New South Wales.
There are many ways in which a building defects claim can be resolved, including:
- Private settlement;
- Work Orders;
- the payment of money; or
- the rectification of the alleged building defects.
The above outcomes can be obtained by privately negotiating the outcome with the building professional or developer or by obtaining a Tribunal or Court order.
The resolution of a building defects claim ought to be carefully considered to ensure, amongst other things, the amount of money paid by a building professional or developer adequately covers the costs of another building professional to rectify the alleged defects or that the scope of the proposed rectification works is adequate and properly undertaken and completed.
Contact us to today to see how we can help you keep the building professional or developer accountable to completing the project or rectifying the alleged defects.
No two claims are the same and the length of time it takes to resolve a claim depends on a number of factors including but not limited to the facts and issues in dispute, the nature of the defects, the quantum of the costs to rectify the defects and the reasonableness or otherwise of the parties.
Straightforward matters may be commercially resolved quickly (i.e. within a month). More complicated claims which are contested by building professionals and/or developers may take up to 12 months.
In our experience, the timeframe for contested Tribunal proceedings is typically between 4 months to 10 months and Court proceedings between 8 months to 14 months.
We endeavour to work as effectively as possible to drive the proceedings so that a resolution is achieved as quickly as possible for our client.