When can you make a claim? Builder’s Warranties
When entering into a domestic building contract, be it for the full construction of a house, or simply renovations or extensions to an existing building, the law adds a number of compulsory warranties to the contract.
The Domestic Building and Contracts Act 1995 introduces into all contracts what are often referred to as ‘Section 8’ warranties. These warranties ensure the builders have certain obligations and must meet certain standards when completing the work. If the builder breaches these obligations, or fails to meet these standards, an action can be brought against them for damages.
The warranties require the builder to do as follows:
- To complete work in a proper and workman like manner, and in accordance with the plans and specifications;
- To use good materials which are suitable and new (unless the owner specifically requests otherwise e.g. using salvaged timber);
- To ensure all work complies with relevant laws and legal requirements;
- To use reasonable care and skill, and complete the work on time;
- To ensure the completed work will be suitable for occupation; and
- To use their skill, judgement, and suitable materials to ensure the work achieves the purpose as set out in the contract.
These warranties run with the land, which means if the work is completed, and the land has been subsequently sold, the new owner will be protected by the warranties and would be able to claim for losses as a result of any defective works undertaken on the land
The warranties also can’t be avoided, meaning even if a term in the contract attempts to exclude a warranty, it will still apply to owners and subsequent purchasers.
If, following or during the work, defects or issues arise in the builder’s work, an action can be brought against them for breach of the builder’s warranties.
In order to do so, certain time limits must be adhered to.
Most building dispute claims will be brought before the Victorian Civil and Administrative Tribunal (VCAT). The Building Act 1993 sets out that any action must be brought before VCAT within 10 years of the occupancy permit, or final inspection certificate, being issued for the works. If the works were terminated prior to completion, then the time limit begins at the point of termination, or the last time the builder was on site.
Certain steps must be taken before a matter can be brought before VCAT, including an application to Domestic Building Disputes Resolution Victoria (DBDRV). The DBDRV process will attempt to resolve the matter through discussions between the parties. If the discussions are unsuccessful, the DBDRV will issue a certificate allowing the matter to proceed to VCAT.
It is very important to note that the DBDRV process must be completed within the 10-year time limit. The DBDRV process can take some time, and the clock will not stop during these proceedings.
Domestic Building Insurance Policies
Other time limits to consider include those contained within the Domestic Building Insurance (DBI) policy. The Domestic Building Insurance Policy runs with the land and protects the owner and subsequent purchaser against any building defects for up to $300,000
This policy provides cover for claims in the event the builder dies, becomes insolvent, disappears, or fails to comply with a tribunal/court order. The terms of the policy set out a 2-year time limit for ‘non-structural defects’ (i.e. issues with painting, joinery, internal doors etc.), and a 6-year time limit for ‘structural defects’ (i.e. foundations, roof issues, load-bearing walls etc.).
You can still claim pursuant to the Domestic Building Insurance Policy even after the 6 year or 2 year limitation period, or when the policy has expired as long as you can prove that your loss occurred during the insured period, please see legal advice with regards to this since strict evidentiary factors would need to be considered and proven
The time limits begin at the point the work was completed, or in the case of a dispute, the point at which the contract was terminated.
Further time limits can come into play when an action relates to negligence, or seeks to include 3rd parties.
If you are in a situation where you want to know your rights or find out more about how the warranties or time limits affect your situation, please contact Boutique Lawyers on 1300 556 140 for an initial consultation.