Are you about to build a house?

Whether you will be the home dweller or builder, learn what a defect is and what your rights are when it comes to defects.

While every builder dreams of the perfect build without so much as a single fault being found with their work, the reality of most construction projects is that once the work is complete, issues may be taken with some of the work and a complaint may be made that some of the work is defective.  

It is important to understand what is meant by the term ‘defect’, how a contractual ‘defects liability period’ works in practical terms and whether there is any right to claim damages for the cost of rectifying a defect.

What is a ‘defect’?

Ordinarily, where the term ‘defect’ is used in a construction contract, it refers to work that has not been performed in accordance with the contract... and the plans and specification which comprise the contract. 

Matters to take into consideration in determining if there is a defect may include:

• the quality of any work and the standard of workmanship;

• whether the plan have been followed and correct materials have been used; and

• whether the works have been performed in accordance with the specifications and drawings. 

The ‘defects liability period’ and how it works

A defects liability period is the time period specified in the contract during which a contractor is required to return to a construction site to rectify any defects which have appeared in that contractor’s work since the completion of construction. Usually a defects liability period will start at practical completion and continue for a period of 12 months.

The length of any defects liability period may vary depending upon the nature of the build, the type of work a particular contractor carries out and whether it is likely that any inherent defects may take time to become apparent. For example, it is not uncommon for contracts involving complex builds and large government contracts to specify longer defects liability periods than say a simple domestic building contract.

Why specify a defects liability period in a contract?

A defects liability period gives both a Principal and Contractor a degree of certainty as to the process that will be followed for ‘making good’ any defects which may not be apparent at the date of practical completion.

In addition, a defects liability period can also be useful in providing a means of making good any defects that are apparent at the time of practical completion but which either do not need to be rectified prior to practical completion or perhaps cannot be easily rectified due to the presence of other contractors and trades still working on the build.

It also makes practical sense to have a contractor who carried out the original work return to fix any defect because this contractor will be familiar with the site and the work in question.  This should mean that is the most cost effective approach to any rectification work.

Once a defect is fixed, does a new defects liability period commence?

Whether a new defects liability period applies to rectified work will depend on the terms of each particular construction contract.

It is important that both the Principal and Contractor are clear on this point prior to entering into a contract.

What right to damages exists for the cost of rectifying a defect?

Ordinarily, any defect would be a breach of contract if it is not rectified.

Generally, the damages that may be recovered will be sufficient to cover the amount needed to ensure that the work is brought up to the standard that a contractor was initially required to provide under the contract.

Depending on the particular circumstances of a build, damages might include the cost of demolition and rebuilding work and any secondary or incidental costs… such as loss of income, if the property is unable to be rented out due to the extent of the defects or relocation expenses (if tenants are involved) or additional consultant’s fees directly related to the rectification works.

If circumstances dictate that the carrying out rectification work is not reasonable (for example, if a building is so damaged or defective that the work needed is impossible or impractical to carry out) a principal may recover damages for any loss in value of the building and (in very limited circumstances) for loss of enjoyment … for example, if there is no actual loss in value of the subject property but the Principal, is unable to use the building as previously planned.

Help is available

It is always prudent to seek advice prior to entering into any contract to ensure that you fully understand your rights and responsibilities.

If you have already entered into a contract or carried out work and a complaint has now been made that your work is defective, you may be concerned about both your professional reputation and any potential financial implications for your business.

If you find yourself in a situation where this could be an issue we recommend you seek legal advice as soon as possible.