Thinking of building or renovating? Beware the builder…

Thinking of building or renovating? Beware the builder…

Thinking of building or renovating? Most complaints received by the Office of Fair Trading relate to residential building work. In our experience, the majority of the complaints relate to poor workmanship, substandard materials and unfinished work.

Knowing your builder

That’s why before the work starts, it is important to research your builder.

Before signing your contract, you need to be certain what you are contracting your builder to do and that they are qualified to do the work. It is important, when you are choosing a builder to check the Office of Fair Trading website to check the builder’s licence.

The website will show the builder’s licence number, the type of licence, and whether there have been any cancellations, suspensions, prosecutions, insurance claims or other negative events in the history of the license.

Obviously, if the builder has only been licensed for a short period of time, or if there is a history of infringements, disciplinary actions and the like then you would want to think twice about retaining the builder.

Don’t stop there though. Try to speak to current or recent clients to find out what the builder was like to work with and the quality of his work.

It also helps to meet with your builder and communicate what your expectations are with the proposed building works. Early communication often allows the parties to determine any probable variations to the proposed works prior to the works commencing.

Understanding your contract

The next step is to ensure that your contract for residential building work complies with legal requirements and protects you and not just the builder.

If the proposed building work is over $5,000 (including GST) a builder must provide you with a written contract for residential building work. Usually residential building work between $5,000 and $20,000 is covered by a ‘small jobs’ contract. The builder must also provide you with a copy of the consumer building guide.

Some things to consider to protect yourself

Residential building in excess of $20,000 in value needs a more extensive home building contract signed by both the builder and home owner. 

Your contract must contain the relevant statutory warranties under the Home Building Act; approved plans and specifications; an agreed contract price or “cost plus”; and a description of the work to be done, to name but a few.

Most importantly, you need to be confident that the work can be done for the contract price and that the builder has taken out a home warranty insurance policy with a recognised insurer. We are able to review and advise you on your building contract before you sign it.

Often builders are often short on funds and ask for money upfront and home owners feel compelled to pay the money so that they can have the building work promptly completed. It is important to remember that a builder must never require you to pay a deposit amount that is more than that required by law, which is usually 10% of the contract price, or estimate the costs of works (if on a “cost-plus” basis).

As a home owner, you must also be aware that the Home Building Act 1989 requires a builder to obtain home warranty insurance for residential building exceeding $20,000.00 before starting any work or taking any money under the contract, including the deposit.

Changing the contract or the scope of work

Generally, building contracts contain a provision for variations to the contract works. Such variations often involve an adjustment to the contract price. Any variation to the contract should be recorded in writing and approved by you and the builder.

If you are thinking of building or renovating we are able to review and advise you on your building contract before you sign it, as to enter into a contract without advice will no doubt increase your exposure to cost overruns, builder’s walking off site and defective work. Call our team on 02 8987 0000.

This article contains general information and is prepared without taking into account your specific objectives.  Before acting on the contents, you should obtain the specific legal advice in relation to your own circumstances.

Claiming for Building Defects: A guide to limitation periods

Claiming for Building Defects: A guide to limitation periods

Before contemplating litigation for building or strata defect claims the first thing that you need to ask yourself is “Am I out of time?” When claiming for building defects there are limitation periods.

With nearly every type of legal action there is a limitation period. This is the period of time after which no action can be taken. If your claim is brought out of time then it’s probably doomed to fail from the outset. This is especially the case in claims involving defects in residential building work.

The Home Building Act 1989 (the Act) and its regulations provide for limitation periods for claiming under the statutory warranties found in section 18B of the Act. These warranties are automatically implied into a building contract for “residential building work” and include:

(a) building works “will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract”; and

(b) materials will be “good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract that those materials will be new”; and

(c) “work will be done in accordance with, and will comply with, the Act or any other laws”; and

(d) “the work will be done with due diligence and within the time stipulated in the contract”, the “dwelling is reasonably fit for occupation”; and

(e) materials used are “reasonability fit for the specified purpose”.

If your builder breaches these statutory warranties it often results in defects occurring and an owner may commence an action for damages against the builder (or developer).

It used to be the case that an owner had a period of 7 years from the date of completion of the work within which to commence proceedings for a breach of a statutory warranty however the legislation was amended reducing that period to 6 years for a “major defect” and 2 years for a “minor defect”.

More often than not owners are confused as to what limitation periods applies to their situation. If the date of your building contract is:
1.before 1 February 2012, the limitation period for all defects is 7 years from the date of completion of the work;
2.between 1 February 2012-15 January 2015, the limitation period for “structural defects” is 6 years and minor defects 2 years from the date of completion of the work; and
3.from 15 January 2015 onwards the limitation period for “major defects” (previously referred to as structural defects) is 6 years and minor defects (being a defect that is not a Major Defect) is 2 years from the date of completion of the work

The limitation period commences from the date of completion of the work. Section 3B of the Act refers to this date as the date of “practical completion”, which is often recorded in the Building Contract. If the Building Contract is silent on the issue or there is no Building Contract, it is determined by the earliest of the date that:
 the Builder hands over possession to the Owner;
 the Builder left the site; or
 Occupation Certificate is issued.
It’s also extremely important now to understand what a “major defect” is and what a “minor defect” is. We will address this in part 2 of this series.

If you have recently retained a builder who you are not happy with or you are the Owner of a house or a residential unit in a Strata Scheme and you are interested in claiming for building defects, contact us for advice as to how to best protect yourself.

This article contains general information and is prepared without taking into account your specific objectives.  Before acting on the contents, you should obtain specific legal advice in relation to your own circumstances.