Statutory Warranties for Home Building Work

HIA Industry Update for NHS
Approx read time: 3 minutes

Many enquires fielded by HIA relate to the builder’s ongoing obligation to a home owner after a job has been completed: for how long do I warrant my work? Am I obliged to go back and fix something that was done 2, 3, or 4 years ago? Is this leak the owner is complaining about my problem?

For all residential building work undertaken, statutory warranties apply to those works. This means that as a contractor you make certain promises to the owner about the works performed under your contract. This month’s HIA update is regarding what these promises are, and the time periods within which a claim of breach of warranty can be made.

When do these apply?

When you carry out residential building work for an owner where the value is more than $5,000 you are deemed to make certain promises to the owner (and possibly future owners of the property) in relation to that work. The following update gives an overview of these promises.

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?

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.

These warranty periods apply to contracts entered into after 1 February 2012. For jobs started or completed prior to this time, the warranty period is 7 years with no distinct periods for ‘major’ or ‘other’ defects. Each alleged breach of warranty would need to be investigated to determine whether it relates to the builder/ contractor’s workmanship. Industry guidance materials like standards and tolerances guides can assist.

What to do if a an owner claims under a warranty

If an owner claims you have breached a statutory warranty you must reply. You should go and 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.

Defence

It is a defence if you can prove that the defect has arisen from:

  • the owner’s instructions which were contrary to your written advice;
  • 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. A relevant professional could be an architect, engineer, surveyor or someone else with specialist or expert knowledge relevant to the residential building work.

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.

Do warranties apply to the work performed by subcontractors

These warranties are also implied into contracts between principal contractors (the builder) and subcontractors for residential building work. In other words, subcontractors owe the same warranties for their work to a principal contractor that a principal contractor owes to the owner/client.

For further information, please contact your Workplace Adviser on 1300 650 620.

For more information, HIA members can contact HIA’s Workplace Services team on 1300 650 620 or email NSW_IR&Legal@hia.com.au.

 

Craig Jennion
HIA Executive Director – Hunter