Building a new home is an exciting and creative time in anyone’s life. However, on occasion, there can be issues between the contractor and the home builder that cause a project to be derailed or improperly completed. When this happens both parties are subject to the provisions of the law contained in the Home Building Act 1989 and the procedures of the Home Building Compensation Fund. These legal entities provide guidelines and protections for both the builder and the homeowner.

Builders and contractors are required to obtain insurance for all contracting jobs through the Home Building Compensation Fund. The contractor must secure their insurance policies prior to taking any money from a homeowner and before beginning work.

Once you have purchased insurance, the builder and the homeowner must comply with the rules and regulations of the Home Building Act 1989. Under this Act all contractors are required to carry a minimum amount of insurance in case there are any warranty issues with the construction.

Section 2C subsection 18B 1 (a-f) warranties the following:

a) The work will be done with care and skill and in accordance with the specified plans

b) All materials supplied will be suitable for the purpose of their intended use and unless otherwise agreed to, all materials will be purchased new

c) All work will comply with the Home Building Act of 1989

d) Work will be done with due diligence in the time specified

e) If the work is in relation to a dwelling, it will be fit for inhabitants

f) All materials will be fit for their intended purpose.

If the homeowner expressly speaks to the contractor or their legal agent about any particular, it is understood that they are relying on the specific expertise and skill of the contractor/legal agent to achieve that desired outcome.

If any of the above factors are breached by the contractor, the homeowner also has specific responsibilities with regard to pursuing a claim against the builder. Those responsibilities are delineated in the Home Building Act 1989 Section 2C Subsection 18BA 1-5 and are as follows:

18BA (1)

a) The homeowner must attempt to mitigate the loss

b) If the contractor alleges that the homeowner did not take proper steps to mitigate the loss, they also carry the burden of proving the same

18BA (2)

The right to enter into a contract to mitigate the loss belongs to the holder of the statutory warranty, thereby the homeowner may enter into a new contract with a new builder to mitigate the loss created by the breach of contract by the original builder

18BA (3)

The relevant parts of this section pertain to the homeowner giving notice of the breach and time to cure to the builder. Hence the following is required:

Once the breach becomes apparent, the homeowner must give written notice of the breach of warranty to the contractor within 60 days of discovery of the same
The homeowner must give the contractor reasonable access to the property to cure the breach of statutory warranty

If a breach of warranty occurs and cannot be cured via cooperation by the parties, then the Act provides for procedural remedies. As such the following procedures must occur per Section 2C subsection 18E 1 (a-f)

a) The proceeding claim must begin before the warranty expires

b) If the claim is for a major defect, the homeowner has 6 years to file their claim. If it is for a minor issue, the homeowner has 2 years to file their claim

c) The warranty period starts at the point at which the claimed defect was completed

d) If the work was not completed and is defective in its incomplete state then the warranty period starts at the:

1) date the contract was completed,

2) the date the work ceased, or

3) if the contract was not terminated, but the work never commenced, then the warranty period starts on the date of the contract

In addition to the protections of the Act, a homeowner also must simultaneously file a claim with the Home Building Compensation Fund. The basis for a claim can be grounded in any loss or damage that the homeowner suffers as a result of faulty or incomplete work by the contractor or any of the legally employed subcontractors. The extent of the coverage includes the following:

  1. A breach of the statutory warranty
  2. Faulty design
  3. The cost of any alternatives that had to be put into place
  4. The loss of the homeowner’s deposit and possibly other funds paid
  5. Defective materials
  6. Faulty design
  7. Incomplete work
  8. Legal costs reasonably incurred to cure the issues

The procedural time frames for the homeowner to give notice of a claim and timely filing of a claim are consistent with those laid out in the Home Building Act 1989. To formally file a claim, a homeowner must contact their insurance company and obtain as much information as possible regarding their coverage. Such information should be revealed to the attorney and/or solicitor that will be assisting them with the handling of their breach of warranty claim.

Building a new home creates its own inherent stress which, even under the best of circumstances, can be trying. Therefore, when a large building project goes awry, the stress and concern can become overwhelming. In such instances, it is best to seek the advice of those professionals who are familiar with the process of protecting a homeowner’s rights under both the Home Building Act 1989 and the Home Building Compensation Fund.

In the event that you find yourself in need of such assistance, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 780 770.