Dealing with defects in Western Australia

A builder is required to rectify defects based on a range of legislative and contractual obligations, including:

• the defects liability period under the contract
• the requirements of the Home Building Contracts Act
• legislated obligations under the Building Services (Complaint Resolution and Administration) Act
• manufacturer’s warranties
• consumer warranties under the Australian Consumer Law.

Defining ‘defects’

The Home Building Contracts Act (HBCA) requires that every home building contract includes a term that requires the builder to rectify any defects notified by the owner within four months of practical completion (unless the contract specifies a longer time). The legislation makes it clear that the builder must carry out any rectification work at their own cost. “Defect” is defined under the relevant law to mean a failure to:

• perform the home building work in a proper and workmanlike manner and in accordance with the contract; or
• supply materials that are of merchantable quality and reasonably fit for the purpose for which the owner required the home building work to be performed.

If the builder does not make good any defects notified to them by the client during the defects liability period (DLP), the client may lodge a complaint with the Building Commission. This may result in the Building Commission issuing an order requiring the builder to carry out any necessary rectification work.

Dealing with defects at practical completion

Many errors and defects are identified at the practical completion (PC) stage when the builder hands over the works to the client. However, PC does not require the work to be “perfect”. Rather, it means the work is completed except for any omissions or defects which do not prevent the building work from being reasonably capable of being used for its intended purpose.

HIA often receives calls from members advising that their clients are disputing PC and withholding payment due to an alleged minor defect in the work or because minor rectification work has not yet been completed. Under HIA contracts, if the builder has met the definition of PC and followed the contractual process, they are entitled to be paid in full. Therefore, any attempt by the client to withhold payment for minor defects would generally constitute a breach of contract.

Where a practical completion or final payment dispute arises, HIA strongly recommends that the builder does not hand over the works until they are contractually required to do so and seeks further advice. Under the contract, the builder is only required to hand over the works once the client has paid the final claim in full. Accordingly, if the client is withholding payment, retaining possession of the keys is one of the few protections available to the builder to secure payment.

How long is the builder liable for defective workmanship?

While many residential building contracts provide for a four‑month contractual defects liability period, this is separate from the statutory regime. Under the Building Services (Complaint Resolution and Administration) Act 2011 (WA), a person adversely affected may lodge a complaint about faulty or unsatisfactory building work for up to six years after practical completion. Accordingly, a builder is ultimately responsible for defects for a period of six years. In limited cases, claims can also be brought outside of the general six-year period. For example, where there is a claim for personal injury arising from latent or hidden structural defects in the building works, the limitation period commences from the time the defect becomes reasonably apparent or discoverable. Additionally, certain products may also carry their own extended warranty or defect liability periods. For example, a plumbing pipe product may offer a 15‑year product warranty relating to specific manufacturing defects.

Who can make a claim within the six-year period?

During the six-year period, a complaint for a breach of the builder’s legislated obligations can be made by not only the client, but also a subsequent owner of the property or any other third party who is adversely affected by the works (i.e. a neighbor). These complaints are heard and decided by the Building Commission.

What should you do if you receive a request to rectify defective works?

Not every issue that arises during the six-year liability period will be due to faulty workmanship. Issues caused by fair wear and tear, lack of maintenance, or damage caused by the owner are not the builder’s responsibility and the builder is generally not required to rectify these defects.

Generally, when a client identifies a potential defect, they will contact the builder and bring the workmanship issues to their attention. When responding to a client, it is best practice for the builder to send a representative along in ‘good faith’ to assess the building work and then decide as to whether you have any liability for performing rectification work.

A practical way of assessing whether the owner’s complaint is reasonable is to ask yourself if you would be prepared to accept that quality of work in your own home.

Government authorities

Local government authorities have the power to monitor and enforce compliance with building and occupancy permits. If a permit authority discovers non-complaint building works, they may order the building service provider to remedy the problem. This applies irrespective of when the works were carried out.

The Building Commission also has powers to order building service providers to remedy faulty building works that are found during proactive audits of building sites, but only if there is a dangerous situation requiring immediate action.

Protecting yourself from liability

Holding the appropriate insurance to cover yourself against claims during the relevant six-year limitation period is an important step in protecting your business

It is also prudent to ensure that whenever you carry out works for a client, you have a written contract in place that clearly outlines the detailed scope of the works that you will be carrying out. This documentation is invaluable in responding to any later allegations of defective workmanship - for example, where the issue relates to work performed by the client or another third party without your knowledge or consent.

To find out more, contact HIA's Contracts and Compliance team

Email us