Problems Associated With Builders Fixing Defects Without a Contract to Perform the Works

Fixing Defects – Should you let the builder back without a contract?

A fairly common scenario, which can cause a lot of problems for owners corporations, is when the original builder comes back to rectify building defects, without a contract to do that work. It is fairly easy to find oneself in that situation. The owners corporation will typically have been on the builder’s back for some time to fix problems and prefer a casual response from the builder to no response at all. The builder will typically have moved on to other things and not be keen to come back to do rectification work, let alone incur legal costs creating a contract do so. Both may be under the false impression that the rectification work will be covered by the original contract.

Here are some of the reasons why this is a bad idea and why the cost of documenting arrangements for the rectification work by contract is a wise investment:

  • Without a clear specification of the work to be carried out, an opportunity exists for the builder to control the process and carry out “band-aid” repairs, which don't resolve the underlying issues and potentially drag the matter out until statutory warranties and limitation periods for commencing proceedings have expired, leaving the owners corporation without further recourse.
  • Such work may not be subject to further statutory or contractual warranties or homeowner warranty insurance and may not be covered by the warranties and insurance for the original work.
  • Owners corporations will inevitably incur legal and expert costs in relation to the rectification works and won't be able to recoup these costs in such a scenario. This will in turn put pressure on the owners corporation to minimise legal and expert costs, undermining proper specification and checking of the work.
  • Such works can result in suspension of the owners corporation's building insurance, unless the insurer is notified and agrees otherwise, leaving the owners corporation without proper insurance cover for the duration of the works.
  • Strata committee members and their strata managing agents should be concerned about potential personal liability arising from commissioning rectification works without the owners corporation being protected by a proper contract and process.

We frequently advise owners corporations in relation to contracts for remedial works. Invariably, the cost of that is outweighed greatly by the potential risks which the owners corporation would otherwise be taking. Further, done this way, owners corporations are much more likely to have their building defect problems fixed properly.

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***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.


Prepared by Bannermans Lawyers

9 June 2016

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For more information on this topic or any legal enquiries please contact your Strata Team.

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