The Safety Net under the Domestic Building and Contracts Act
By Owen Lai, Solicitor, Lovegrove Smith & Cotton Lawyers
The Domestic Building Contracts Act 1995 (“the Act”) incorporates warranties, akin to a ‘statutory guarantee’, in every domestic building contract as a safety net that aims to protect homeowners by ensuring a standard of building work is maintained by builders. These warranties are contained under section 8 of the Act and paraphrased as follows:
- The building work will be carried out in a proper and workmanlike manner in accordance with the plans and specifications in the domestic building contract;
- Materials to be supplied by the builder will be good and suitable for the purpose for which they are used;
- The building work must comply with all laws and legal requirements including the Building Act and Building Regulations;
- The building work must be carried out with reasonable care and skill and completed within the date specified in the building contract;
- The building work will be suitable for occupation at the time the building work is completed where it involves construction or renovation of a home;
- The building works and materials used by the builder will be reasonably fit for purpose where such a purpose is stated in the contract.
These are some of the warranties that illustrate the extent of the protection given to homeowners. They provide a cause of action against the builder where they have not been met, for a period of 10 years after the completion of the building works.
We have observed in practice that there may be some confusion by homeowners who believe that they are not entitled to such warranties as they are not parties to the building contract. This is usually the case where homeowners purchased property off the plan and the developers have entered into separate domestic building contracts. Generally, at common law homeowners in this scenario are not privy to the domestic building contract and accordingly cannot enforce remedies arising from breach of these building contracts. However, section 9 of the Act has expanded the scope of this position to allow homeowners to have recourse where builders have breached one of the warranties under the Act, because the warranties “run with the land”.
Section 9 of the Act relevantly provides that: “In addition to the building owner who was a party to a domestic building contract, any person who is the owner for the time being of the building or land in respect of which the domestic building workwas carried out under the contract may take proceedings for a breach of any of the warranties listed in section 8 as if that person was a party to the contract”. Simply put, homeowners can have a remedy for breach of the warranties, or benefit from the ‘safety net’, where the domestic building work has been carried out on their property, even if they are not the original owner who entered into the domestic building contract.
The qualification is that a building action for breach of the warranties can only be initiated by an owner within a period of 10 years after completion of the building works.
Homeowners need to be aware of this right as it can be misconceived by some that they have no remedies for defective building works on the basis that they did not sign the domestic building contract. Accordingly, there is a danger that these homeowners shy away from seeking legal advice where there is defective building works that may cost tens of thousands of dollars to rectify.
Lovegrove Smith & Cotton Lawyers
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© Lovegrove Solicitor’s 2014