HIA Residential Building Contract Defects
For illustration purposes only.

What is a defect?

A building defect may be anything from substandard quality in design and construction, a deviation from or breach of the plans and specifications, faulty workmanship, or early deterioration in the works. 

Some examples:

  • Your plans specify a swimming pool with a maximum depth of 10 feet, but the builder breaches the plans and instead constructs a pool with a maximum depth of 4 feet throughout 
  • The builder constructs a staircase that is too steep and that is clearly a safety hazard
  • The tiler uses inadequate adhesive so the tiles fall off soon after practical completion

Basically, any violation by the builder of the Statutory Warranties in your HIA contract is considered a defect.

Statutory Warranties for HIA Contract
For illustration purposes only.

Statutory Warranties

Under Clause 39 of the 2021 HIA NSW Residential Building Contract for New Dwellings,

the building works should essentially be:

  • done with due care and skill
  • in accordance with the plans and specifications
  • done within the stipulated time (or within a reasonable time)
  • reasonably fit for occupation as a dwelling

and the materials used should be:

  • good and suitable for the purpose (and new, unless otherwise stated)

What to do when there is a defect

The only time you’ll know if there is a building defect is after the handover of the property upon practical completion.

Practical completion

The date of practical completion is specified in Schedule 1, number 6, of the contract, which sets out the Building period.

HIA defects Building Period clause
For illustration purposes only.

Note that practical completion is computed after the building period commences. You will find the latter in Clause 12.

HIA defects Commencing the building works clause
For illustration purposes only.

So, supposing the building works have reached the stage of practical completion. You now have the right to inspect the works and the premises.

Practical Completion Clause on HIA Defects
For illustration purposes only.

Rectifying the defects

If, during your inspection, you find that there are defects in the works, you may give the builder a list of defects. The builder should then rectify the defects.

If you are using the 2021 HIA contract, you may refer to Clause 24 on Defects Liability Period for the timelines, limitations, and procedure.

HIA Defects Liability Period
For illustration purposes only.

When the matter of defects escalate into dispute

If the builder nonetheless refuses to carry out the rectifications notwithstanding the fact that you’ve given him a list of defects within the defects liability period, and said defects are their responsibility, the same may be considered a building dispute. In such case, you are given the following courses of action.

Under Clause 35

  1. Give written notice to the builder, setting out the matter in dispute. In this case, building defects.
  2. You and the builder must meet within 10 working days of the giving of the notice, to attempt to resolve the dispute, or to agree on methods of doing so.
  3. If the dispute is resolved, write down the resolution and sign it.

If the dispute remains unresolved

  1. If, despite attempting to settle the matter between yourselves, the dispute persists, you may opt to bring the matter to the Office of Fair Trading, where you and the builder may be instructed to undergo ADR (Alternative Dispute Resolution).
  2. If the dispute still remains unresolved after taking it to Fair Trading, you will be given a certification to lodge a complaint with NCAT, where the matter will undergo directions hearings. A final hearing may be had where the disposition of the tribunal will be made.
  3. If, after NCAT, the dispute is still unresolved, or if you are not satisfied with the tribunal’s decision, then you may file a complaint in court.

How we can help

The HIA contract is generally written to favor builders. Hence, it may be a good idea to engage a specialist construction lawyer for Contract Review and Advice, so that you may be apprised of what you need to negotiate with your builder. Contracts Specialist has expert building and construction lawyers who can do just that. And if you are currently in dispute with your builder about variations you did not agree to, we can help you with that, as well.