Statutory warranties for home building work in NSW

What are statutory warranties?

These promises or "statutory warranties" are:

• the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract
• all materials supplied will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new
• the work will be done in accordance with, and will comply with, the law
• the work will be done with due diligence and within the time stipulated in the contract or, if no time is stipulated, within a reasonable time
• if the work consists of the construction of a dwelling, alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling
• the work and materials used in doing the work will be reasonably fit for the specified purpose or result, if the owner tells the contractor why they require the work or what result they are after. This shows that the owner relied on the contractor’s skill and judgement.

How long do the warranties apply?

In most instances, a breach of warranty usually relates to workmanship issues, i.e. alleged defects.

The owner, or a subsequent owner of the property, may make a claim that you are in breach of one or more of these warranties within six years for major defects and within two years for other defects from the date of completion.

Where the defect only becomes apparent (owner becomes aware of the defect; or ought reasonably to have become aware) within the last six months of the warranty period, a further six months applies from the end of the warranty period to commence proceedings for a breach of the warranties.

What to do if the owner claims under a warranty

If an owner claims you have breached a statutory warranty you must respond. You should inspect the work. If you want to challenge the owner’s claim you may need to consider getting expert advice. If you are found to be in breach of a statutory warranty you may be told to rectify work or pay damages.

Guidance material is available for common defect issues, such as the NSW Guide to Standards and Tolerances. 

HIA’s Building Service team can also assist you understand requirements of the National Construction Code (NCC) and relevant Australian Standards, and whether your building work complies with those requirements.

Defence

You can defend a statutory warranty claim if you can prove that the defect has arisen from:

• the owner’s instructions, which were contrary to your written advice provided before the work was carried out  
  Note: 
  
  • If the owner’s design or specification does not meet codes, standards or conditions of a development consent, you must inform them in writing of this fact. 
  • Ideally you should recommend that the work be completed in compliance with applicable standards, but if the owner insists on proceeding despite your advice, clearly outline the potential consequences (e.g. reduced functionality or safety risks).
  • It is a good idea to request written acknowledgement from the owner that they have read and understood your advice (including recommendations) and instruct you to proceed per their instruction anyway.
• your reasonable reliance on written instructions given by a person who is a relevant professional acting for the owner and who is independent of you (this means you did not refer the professional, nor been a close associate of the professional within 3 years of the instruction provided). A relevant professional could be an architect, engineer, surveyor or someone else with specialist or expert knowledge relevant to the residential building work.

Owner obligations

An owner, or subsequent owner who has the benefit of these warranties has obligations to mitigate their loss. This means if they find a defect, they need to act as soon as possible to minimise the impacts a defect may have and reduce the loss they might suffer.

The owner must:

• make reasonable efforts to notify the contractor in writing of the breach – this should be within six months of the breach becoming apparent (defect found); and
• not unreasonably refuse access to the contractor who owes the warranties for the purpose of inspecting and rectifying, if responsible.

If an owner fails to meet their obligations, this can be raised if a matter proceeds to court or tribunal. For example, had the owner alerted you of a defect earlier, the amount of damage (works to rectify and costs) may have been minimised, and this may be an argument to reduce the extent of your liability.

Warranties may not be excluded

You cannot exclude or restrict the operation of these statutory warranties and any term in a contract that seeks to do this is void.

What about contract defects liability period?

In addition to the warranties that automatically apply to home building work, most home building contracts, including HIA contracts, include a defects liability period.

This is a short period of time (often 13 weeks) after practical completion that allows builders to proactively address minor defects or issues identified by the owner that may be present at handover or become apparent shortly after handover. Common examples include paint touch-ups, sticking doors, or grout repairs.