The dollar value of residential building disputes is usually much smaller compared to large commercial construction projects. Smaller builders and tradesmen who commence legal proceedings on the basis of what they think is an entitlement to a denied payment often have to deal with cross claims for alleged defective and incomplete work. Having to defend such claims can be fatal to the cash flow of a small building business. It is recommended that builders obtain legal advice to avoid the pitfalls of building and construction litigation.

The Consumer Trader & Tenancy Tribunal (“the Tribunal”) has the jurisdiction to deal with residential disputes where the amount claimed is less than $500,000.00.

Residential disputes are governed by the Home Building Act 1989 and the Home Building Regulations 1997 which have been amended significantly over the last few years. It is essential that the legislation in force at the time of any relevant event as well as up to date legislation is understood and consulted. One must ensure that they are viewing the most up to date legislation.

Time Limitations

First and foremost, statute imposed limitation periods apply to all building contracts These include:

• Determining the period of cover to be provided by an insurance contract and the date that work is to be taken to be complete;
• Time limits for notice of loss or damage for insurance claims;
• Dates for deemed refusals of insurance claims;
• Time limits for appeals against determination of insurance claims;
• Time limits for lodgement of claims where an insurer has become insolvent and the government rescue package applies;
• Claims for breach of statutory warranty;
• Liquidated damages.

Insurance

You must not do residential work under a building contract unless a contract of insurance exists. The current threshold is $12,000.00. Prior to 28 March 2002 , the threshold was $5,000.00.

As a result of recent changes in the legislation, the required insurance cover is now only provided against a restricted category of risk, being the risk of loss resulting from non completion of the work because of the insolvency, debt or disappearance of the builder.

Homeowners are now obliged to pursue the builder instead of having the choice as to whether or not to make an insurance claim. The builder is now more involved in the rectification process than they were before when the homeowner was simply able to make an insurance claim. There are important limitations on liability and cover which are set out in the Home Building Regulations.

Mandatory Contract Provisions

The law now provides for mandatory contract provisions that must be contained in residential building contracts. By way of summary, the provisions state as follows:

• All plans and specifications for work to be done under the contract including variations are taken to form part of the contract;
• Any agreement to vary the contract, plans or specifications must be in writing and signed by each party;
• All work under the building contract will comply with the Building Code of Australia and all other relevant codes, standards and specifications that the work is required to comply with under any law;
• All work will also comply with the conditions of any relevant development consent or complying development certificate.

Similar clauses apply to contracts to supply kit homes.

Cooling Off Period

Further amendments that now apply allow a person to rescind a contract (i.e. act as though it were never in force) for residential building work within 5 days after the person is given a copy of the contract. If the person has not been given a copy of the signed contract within 5 days after the contract has been signed, then they are entitled, before the expiry of 5 clear business days after they were aware that they were entitled to be given a copy of the signed contract, to apply the cooling off period.

A notice must be given to state that the person rescinds the contract and must be given to the builder either personally or by leaving it at the address shown in the contract as the builders.

It should be noted that the cooling off period may be shortened or avoided by provision in the contract. However this provision does not take effect unless and until the other party to the contract gives the builder, in writing, signed by a legal practitioner (that does not act for the builder) and contains a statement to the effect that the legal practitioner explained to the party to the contract the effect of the contract, the nature of the certificate and the effect of giving the certificate to the builder.

Importantly, if a contract does not contain a statement relating to the cooling off period and a person’s rights as stated above, then the person may, by notice in writing, rescind the contract within 7 days of becoming aware that the contract should have contained the notice. A contract can be rescinded under the section even if work has been done under the contract at the time of the rescission. If the contract is rescinded, then the builder is entitled to a reasonable price for the work carried out under the contract at the date the contract is rescinded. However, a builder may not recover under this section more than he would have been entitled to recover under the contract.

FURTHER INFORMATION 

This Information Outline is provided courtesy of the Turnbull Hill Group who are experienced in this area of law. They are located at the Charlestown Commercial Centre, 29 Smith Street Charlestown NSW 2290 or call them on 1300 303 705 if you would like more information on this legal topic, or you wish to obtain formal advice regarding your situation.

For 35 years the team at Turnbull Hill Lawyers has fought to get the best outcomes for our clients. Our firm's success has always been based on giving personal attention to the details of every matter by a dynamic team of lawyers and paralegals dedicated to ensuring complete satisfaction of every client. This is why our lawyers continue to achieve top results for our clients. Underwriting the firm’s success is the fact that Turnbull Hill Lawyers has been retained by thousands of clients as a result of word-of-mouth referrals over the years. This is just one of the many powerful reasons you should choose Turnbull Hill Lawyers. For more information visit our website at www.turnbullhill.com.au.