Domestic Building Contract Basics

Agreement is not in writing

It is sad to see how many renovations end up as disputes because parties have different views on what was agreed upon. For example, the fittings in a bathroom renovation. As a rule, where such matters are documented, there is much less scope for disputation and angst

Again, parties end up in dispute because no clear date was set in writing. Having said that, a section 31 compliant contract should have a completion date that is readily ascertainable.

Parties can end up in dispute because no clear dates were set for payments in stages. This would also be a breach by the builder of the Domestic Building Contracts Act provisions regarding staged payments.

A Builder cannot accept any more than 5% of the contract price when entering into a major domestic building works contract. If a Builder carries out work to a dollar value of more than $5,000.00, the Builder must enter into a major domestic buildings contract (“MDBC”). Sometimes contract is carrying out only one type of work, e.g. cabinetry, can be caught out if the value is more than $5000.00

If the contract value of the work is $12,000.00 or more, the builder is required by law to procure domestic warranty insurance cover. If this does not occur, it is a breach by the builder of the legislation and the builder may not be able to enforce the contract.

Section 8 of the Domestic Building Contracts Act 1995 provides that compliant building contracts shall include the statutory warranties. These provisions dictate that works must be fit for purpose and that works must be built in accordance with the plans and specifications. Furthermore, the warranties dictate that the works must be carried out in accordance with the Building Act 1993 and the Building Code of Australia. The warranties run with the land. Therefore, a successor in title can sue the original builder for breaches of the statutory warranties.

Owners can sue Builders and Builders can sue Subcontractors for the period of 10 years from the date upon which the building surveyor issues either an occupancy permit or a certificate of final inspection. The period of time by which one can sue for construction elements i.e. 10 years post issue of an occupancy permit is not to be confused with the period of time that one can pursue the domestic warranty insurer. Typically, insurers are on the hook for between 6 and 7 years depending on the relevant year upon which the Ministerial Gazette (that governs insurers’ obligations) that matches the time when the building works took place.