warranty

What are the rights of you and your builder?

Many builders are under the incorrect impression that there are different structural and non-structural warranty periods, or they can set their own defect period policies.  Here’s the answers to some common questions about your builder and warranties.

 

Myth 1: Builders can give a fixed warranty period for a period they choose.

No! There is no way of reducing the limitation period set by the Building Act. If a building defect is discovered, a builder cannot limit his liability by putting a term in your contract, his website or advertising material. In fact, any contract clause or advertising that seeks to reduce the warranty or limitation period will be void and of no effect.

 

Myth 2: There is a 10 year warranty so the builder is liable for defects for 10 years.

Not quite! There is a 10 year limitation period for building actions. This means legal action in VCAT can be started against a builder anytime up to 10 years of completion of a contract or from a date the certificate of occupancy is issued.

The 10 year limitation period does not necessarily mean that you provide a 10 year warranty for your work. What it means is that if a defect is identified in the building, the owner has up to 10 years from the date of the certificate of occupancy (or the completion date) to sue the builder.

 

Myth 3: There is a 2 year non-structural and 6 year structural warranty for building works.

Incorrect. These warranties only apply to Home Owner Warranty Insurance [HOW] claims. These time limits do not otherwise apply to claims against builders. HOW is obtained by the builder for your benefit. In short, a HOW policy protects you in circumstances where your builder has died, disappeared or become insolvent.

 

Myth 4: You are not covered by builders warranty if you purchase someone else’s new home [under 7 years old].

Incorrect. The implied warranties provided by the builder of a property run with the property – not the owner. This means that a new owner of a property can make a claim against a builder, providing they are within the warranty and limitation periods.

How long does a builder have to warranty their workmanship?

Hardiman’s Case Confirmed – Domestic Builder liable for 10 years

This question could not be properly answered and was a subject of a great debate before 6 August 2014, when the Victorian Court of Appeal handed down a long-awaited decision of Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165 (“Brirek”)

Prior to Brirek there was an argument that, despite the limitation period prescribed by section 134 of the Building Act 1993 (Vic), i.e.10 years of the date of the occupancy certificate issue, it would only apply for actions in tort (negligence) and not for actions in contract.  It was argued that for action in contract, section 5 of the Limitation of Actions Act 1958 (Vic) applied, namely a limit of 6 years.

The Brirek decision has stopped this argument by reaching the following conclusion:

  1. Building action has a limitation period prescribed in section 134 of the Building Act;
  2. Section 134 states very clearly that no building action can be brought upon the expiration of 10 years after the issue of an occupancy permit;
  3. This limitation is imposed despite anything stated in any other Act (including the Limitation of Actions Act);
  4. Separating building actions into those in contract and those in tort imposes unwarranted limitations;
  5. The time limit for bringing the action in contract and in tort is 10 years from the date of the issue of the occupancy permit.

This decision has confirmed the reasoning in the matter of Hardiman v Gory [2008] VCAT 267  that was conducted by Hassall’s Litigation Services on behalf of Mrs Hardiman.

Please do not hesitate to contact our office to discuss what this decision means to you if you are thinking of initiating a proceeding or defending a proceeding in a building action.

 

This article provides information that is general in nature and is not a substitute for legal advice.