With the property market cooling and record numbers of off the plan residential developments reaching completion, the issue of defects in building contracts is popping up more and more.
A residential development containing a defect will often appear perfect from the outside and only present themselves upon close inspection or over the course of time. Defects can be caused by builders cutting corners, using cheaper materials, performing work too quickly or not to spec. Defects can leave the buyer with expensive issues to resolve far down the road.
The Opal Tower Case
Recently, the case of Opal Tower made headlines, when the 36-story residential tower was evacuated when the residents discovered cracks appearing throughout the building. These cracks occurred due to the manufacture and assembly of the concrete panels, deviating from the original design. After inspection it was found that the building is structurally sound and in no danger of collapse. Repairing the faults will be costly, slow and disruptive to residents. It was three months before the residents were allowed to move back in. Many residents voiced concerns about the safety of the building. As a result of this the value of the properties in this building fell as the public became aware of the defected building.
What can home owners do if they discover a defect?
Most builders operate under a contract which will provide certain provisions that address what will happen in the case of a defect by the builder. These would usually provide rights to compensation in the event of defect for a fixed term. However owners rights do not finish there, as the contract cannot limit rights provided by the Home Building Act 1989 (NSW).
The Home Building Act 1989 (NSW)
Since 1 February 2012, the statutory warranty period for major defects is 6 years from the completion of the build and for all other defects it is 2 years. This can be extended for a further 6 months providing that the defect is discovered in the last 6 months of the statutory warranty period.
The Home Building Act 1989 – Section 18E defines what constitutes a “major defect” as:
A defect in a “major element” of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause:
- the inability to inhabit or use the building (or part of the building) for its intended purpose, or
- the destruction of the building or any part of the building, or
- a threat of collapse of the building or any part of the building, or
- a defect of a kind that is prescribed by the regulations as a major defect, or
- the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act.
A “major element” of a building means:
- 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
- a fire safety system, or
- waterproofing, or
- other elements as prescribed by the regulations as a major element of a building.
How can a defect be rectified?
A building defect can create costs in many other areas besides the cost repair of the physical issue with the building. Defects such as the one seen in opal tower can result in a loss of the value in each of the apartments, loss of income from rental tenants, costs of relocation and costs of ongoing rectification works that may need to be undertaken.
Who is responsible?
There are many entities that are involved in creating a building. It is important to define all of those that have had a hand in the defect or defects that are in question. The first place to turn is to the builder and the developer, however there may be many more parties responsible for the defect including: sub-contractors, local councils, private certifiers, designers and other specialists.
Purchasing and building your own home is the dream of many Australians. When you discover your home is at risk through the defects of others, the dream can be quickly turned into a nightmare. If developers or builders don’t perform exactly as you had contracted for there can be great risks to your finances and your safety. If you are in the unfortunate position of having to deal with defects, it is essential to become informed about what to do. Make a decision about taking appropriate action to protect your rights, your investment and to do it before the time to do so expires.