Just because the defect liability period has ended doesn’t necessarily mean you aren’t liable

What is the defects liability period?

The vast majority of building and construction contracts provide a defects liability period that the builder is responsible for rectification of defects. It is a contractual mechanism regulating the way defects discovered after completion are to be notified to, and rectified by, the builder.

A common misconception among builders is that upon completion of the defect liability period they are released from any further liability for any defects that may arise.  In most instances this is not the case and Legislative constraints ensure builders continue to be liable for defects.

Applicable Legislation

For example, in NSW:

Pursuant to the Limitation Act 1969:

• claims for a breach of contract must be brought within 6 years from when the breach of contract occurred; and
• claims in common law negligence must be brought within 6 years from when the loss becomes apparent.

Pursuant to the Home Building Act 1989, builders performing residential building works remain liable for defective works by reason of the statutory warranties and such warranties cannot be excluded under the contract. The period of liability for breaches of the statutory warranties in the Home Building Act is six (6) years for major defects and two (2) years for any other non-major defects. This period commences on completion of the works or, if the work is not completed, the date the contract is terminated or work ceased under the contract.

Pursuant to the Design and Building Practitioners Act 2020 owners can follow a simpler path and commence proceedings against builders for a breach of the statutory duty of care (instead of in common law negligence) which the Act imposes on builders to owners, subsequent owners of land and owner corporations in respect of defective works. Builders are liable for the costs to rectify the defects, any damage caused as a consequence of the defects and economic loss suffered such as alternative accommodation. A claim for a breach of the duty of care under the Design and Building Practitioners Act can be made within 6 years from when any loss or damage becomes apparent.

The Environmental Planning and Assessment Act 1979 provides a long stop provision which requires any civil action for loss or damage arising from defective building work be commenced within 10 years after the date of the Occupation Certificate.

Takeaway

Builders should not refuse to perform rectification works simply because they have been notified outside of the defects liability period.

Building contractors must ensure that they are comfortable with the level of risk in their contract. Builders must implement quality construction practices and ensure construction is performed in accordance with the design documentation.

Keystone Lawyers can assist with defect liability claims and contract reviews so contracting parties are able to understand the level of liability and risk imposed on them by the contract.