Residents of Opal Tower were recently given a rude shock when forced to vacate their apartments on Christmas Eve. Cracks appeared on several levels of the 36 storey mixed use building in Sydney only completed in August 2018. The ongoing saga involving residents, builder Icon and developer Australia Avenue Developments Pty Ltd is a cautionary tale for anyone buying an off-the-plan unit or involved in the construction process. However, what steps can you take to avoid a similar situation and remedy structural defects if you are a buyer and conversely, what should you consider if a buyer subsequently claims that the building or renovation you have constructed is defective?
Defect liability period
Most contracts in the ACT for the purchase of an off-the-plan unit or construction of a single dwelling contain a defect liability period. This permits the buyer to submit a list of defects to the builder (or developer) which the builder will be required to repair. Defects are generally considered to be flaws in construction due to improper materials or faulty workmanship. However, it is important to be aware of the particular defects liability provisions as these can be drafted to limit the defects required to be repaired. Often this is reasonable, for example by excluding defects covered by manufacturer’s warranties. However, these provisions can also include unreasonable exemptions, for example, ‘settlement cracks’. The defect liability period will also set a defined period for the buyer to submit the defect list. A builder will not be required to rectify any defect notified outside of this period.
Statutory Building Warranties
Where a defect is revealed after the end of the defect liability period, often the only recourse available for defective building work is for breach of a statutory warranty (found in the Building Act 2004 (the Act). The Act implies important warranties into contracts with respect to carrying out residential building work or for the sale of a residential building, that provides the work will be carried out in accordance with the Act and the approved plans, in a proper and skilful manner and good and proper materials were used. These warranties exist for a period of 6 years in respect of structural defects and 2 years in respect of non-structural defects. Although considering the case Kondouras v The Owners – Units Plan No 1917 (2017) ACTCA 36 a buyer may be able to make a claim after the end of the six year period if the builder was in breach of the warranty at the end of the warranty period or if further building work is undertaken.
While the ACT has not experienced its own Opal Tower yet, issues with defect building work nonetheless remains topical and the ACT courts have generally adopted a pro-buyer approach. Regardless, those buying off-the-plan should conduct due diligence to ensure that the contract protects their interest and that they seek legal advice on options available if a defect is revealed after the end of the defect liability period. Builders and developers should ensure their contracts are adequately drafted so that only reasonable defects are required to be repaired and seek legal advice if a buyer claims breach of a statutory warranty.