Defective Claims & Incomplete Works
Your Rights Around Building Defects
Within the insurance period, construction businesses are obliged to rectify defects in response to any defective claim you make. While some claims processes run smoothly, others do not, calling for a lawyer with construction expertise.
Spotted a defect?
What you need to know
Building defects can be major or minor, which as their names suggest, come with varying levels of complexity when it comes to making a claim. How a claim is settled is up to the parties involved and while is some cases may involve the simple, amicable and timely rectification of a defect, others may involve large compensation payments, expert determination and court proceedings.
Upon entering into your building agreement, your builder, given that they are licensed to complete the work, would have provided you with statutory warranties for the work commissioned. What this means to you is that, provided you are still within the warranty period, you are entitled to request the builder fix the defective or incomplete work. However, there are critical time periods that you should be aware of that need to be adhered to when it comes to making a claim against defective building work, to ensure your rights to pursue the builder are not lost.
- Non-completion claims – 12 months from the failure to commence or from the cessation of the building work.
- Non-structural defects – 2 years from the date of completion.
- Structural defects – 6 years from the date of completion.
By seeking legal counsel at the outset of the project you can be sure that you are covered and don’t miss out on any vital deadlines.
If you’re building a home and are unhappy with how it is progressing, the sooner you seek advice from a construction lawyer, the better. Knowing your rights throughout the building process and swiftly and efficiently processing claims against defective building works early on in the piece can ensure the avoidance of unnecessary legal red tape and stressful disputes.
In circumstances where the builder has failed to complete the works by the practical completion date you will need to terminate your contact with the builder first before you are able to make a claim under the insurance scheme. There are various avenues available to you in terminating your contract however these would vary depending on the circumstances and the terms of the particular contract.
It is important that you seek legal advice in going down this path so that you ensure that you terminate your contact properly as a contract not terminated properly will void your insurance and will be prevent you for being able to proceed with an incomplete works claim with your statutory insurer.
Thinking about approaching a defective claim against a builder or developer without legal advice? Think again. When negotiating over a building defect, more often than not a builder will try to gain some release from contractual obligations into the future as part of the arrangement, which may be detrimental if you need to make another claim down the line. Don’t take the risk and seek advice when pursuing a claim.
In the event of a defective claim against building work, more often than not the builder will prefer to return and carry out remedial works to avoid having to pay compensation or incurring the expense of a third party completing the rectification. If for whatever reason you don’t want the builder back at the property to rectify the defects, you should seek legal advice on your options.
The New South Wales Home Warranty Insurance Fund is a statutory insurance scheme that provides insurance cover for certain residential construction work valued at more than $20,000. The NSW scheme provides protection for consumers where:
- There has been faulty or incomplete work on residential buildings.
- The builder becomes insolvent, dies or disappears.
- The builder’s licence is suspended or cancelled by NSW Fair Trading.
A homeowner seeking to make a claim under the New South Wales Home Warranty Insurance Fund must first give written notice using the Loss Notification Form to the insurance agent who issued the Certificate of Insurance. A homeowner must then take action to try and resolve the dispute with the builder and to have the builder complete and/or rectify the subject building work. Strata defects are covered by the insurance fund, however, the claim must be issued on behalf of the Owners Corporation.
The Queensland Home Warranty Scheme is a statutory insurance scheme that provides insurance cover for certain residential construction work valued over $3,300. Its purpose is to provide protection for consumers for non-completion, defective construction and subsidence. The scheme usually covers construction of and repairs to the single detached dwellings, residential units and townhouses of three storeys or less. A homeowner can make a claim on the insurance scheme by lodging a Complaint Form with the Queensland Building and Construction Commission.
Building and Construction
Our building and construction team has a strong reputation within the industry.
What sets us apart is our understanding of the commercial realities of the construction industry, our commitment to our clients, respecting their objectives and appreciating the commercial perspective in dealing with construction matters.
We advise building contractors, sub-contractors, engineers, owners, developers, government agencies, investors as well as homeowners and bodies corporate in all areas of building and construction law.
We offer clients our sound knowledge and understanding with respect to the relevant legislation and practices. Our lawyers are experienced in all areas with respect to:
- Contract interpretation and advice
- Construction contract negotiation
- Construction disputes
- Defective and incomplete building work
- Strata and body corporate building issues
- Professional liability and negligence
- Risk management and due diligence for property development
- Building dispute resolution
- Construction litigation
- Subcontractor’s Charges
- Payment claims and debt recovery
Our key areas of expertise include:
- Commercial Construction Disputes
- Building and Construction Industry Payments Act claims (Qld)
- Building and Construction Industry Security of Payment Act claims (NSW)
- Charges under Chapter 4 of the Building Industry Fairness (Security of Payment) Act 2017 (QLD)
- Claims concerning defective and incomplete work
- Queensland Home Warranty Scheme
- New South Wales Home Building Compensation Fund (HBCF)
Commercial Construction Disputes
It is not uncommon during the course of a commercial construction project for disputes to arise between the interested parties.
Rostron Carlyle can assist builders, developers, contractors and subcontractors in a wide range of construction related disputes including:
- Variation claims;
- Extension of time claims;
- Claims for liquidated damages;
- Claims for delay, defective and incomplete works;
- Disputes about time bars, set off and abatement;
- Quantum meruit claims; and
- Contract termination.
Rostron Carlyle also has extensive experience in proceedings under the various security for payment acts including Building Industry Fairness (Security of Payment) Act 2017 (QLD), Chapter 4 of the Building Industry Fairness (Security of Payment) Act 2017 (QLD) (Subcontractors’ Charges) and Building and Construction Industry Security of Payment Act 1999 (NSW) as well as being able to assist with reviews of QBCC licensing and rectification decisions to the Queensland Civil and Administrative Tribunal.
Building and Construction Industry Payments Act (Qld)
The Building Industry Fairness (Security of Payment) Act 2017 (QLD) (BIF Act) provides a legal framework for the time and cost-effective recovery of payments owed for construction work or the supply of related goods or services under a construction contract in Queensland.
Construction work and the supply of related goods or services can include, but is not limited to:
- 1. Construction work;
- Preparatory works;
- Demolition;
- Renovations;
- Fabrication of materials;
- Provision of labour;
- Architectural, design, surveying or quantity surveying services relating to construction work; and
- Hire of plant and equipment.
When can I make a payment claim?
A payment claim can be made with respect to the building work carried out prior to the reference date as specified in the terms of the building contract or otherwise as determined by the BIF Act, usually being on the last day of the month in which the works were carried out or the goods or services were supplied.
What should I do if I am served with a Payment Claim?
A party served with a payment claim must respond at the earlier of what is stated in the relevant contract and fifteen business days from the date of service to provide the claimant with a payment schedule.
The payment schedule must both:
- identify the payment claim to which it relates;
- state the amount of the payment, if any, that the party proposes to make; and
- if the amount proposed to be paid is less that the amount stated in the payment claim, state why the amount proposed to be paid is less, including the respondent’s reasons for withholding any payment. It is important to note that an Adjudication Response is limited to the reasons contained in the payment schedule.
Where the amount of a payment claim is to be disputed, it is extremely important that a payment schedule be served within the time permitted under the BIF Act. A failure to do so may result in the party served with the payment claim becoming liable for the whole claimed amount.
What are the relevant time frames?
Refer to our BIF Act flow chart here for a summary of the time frames.
What is an Adjudication?
Adjudication is a less formal legal process whereby a claimant’s payment claim is assessed by an adjudicator whether or not a payment schedule is issued by the respondent. This is done by way of an adjudication application.
In deciding the adjudication application, an adjudicator will determine:
- the amount of the progress payment, if any, to be paid by the respondent to the claimant (the adjudicated amount); and
- the date on which any amount became or becomes payable; and
- the rate of interest payable on any amount.
When determining the above, the adjudicator is limited in the material that he or she may consider. In this regard, an adjudicator can only consider the matters as set out in section 88(2) of the BIF Act.
What if the Respondent does not serve a payment schedule or pay an adjudicated amount?
Where a party fails to serve a payment schedule in response to a payment claim, the claimant may either:
- apply directly to the Court for judgment against the respondent for the claimed amount; or
- proceed with an adjudication application.
Where a claimant decides to proceed directly to Court for judgment, the provisions of the BIF Act prevent the respondent from raising any counterclaim against the claimant or any defence in relation to matters arising under the construction contract.
Alternatively, where a respondent is adjudicated to be liable for an adjudicated amount and fails to pay that amount by the date stipulated in the adjudication, then the claimant can request a certificate from the adjudicator. This adjudication certificate may then be filed as a judgment for a debt and may be enforced in a court of competent jurisdiction.
For further information make an online enquiry or contact us on 07 3009 8444.
Building and Construction Industry Security of Payment Act (NSW)
The Building and Construction Industry Security of Payment Act 1999 (“BCISPA”) in New South Wales provides a legal framework for the timely and cost-effective recovery of payments owed for construction work or the supply of related goods or services under a construction contract.
We regularly assist builders and developers in preparation of payment claims, payment schedules, adjudication applications and responses on urgent instructions and within tight deadlines.
Construction work and the supply of related goods or services can include, but is not limited to:
- Construction work;
- Preparatory works;
- Demolition;
- Renovations;
- Fabrication of materials;
- Provision of labour;
- Architectural, design, surveying or quantity surveying services relating to construction work; and
- Hire of plant and equipment
When can I make a payment claim?
A payment claim can be made with respect to the building work carried out prior to the reference date as specified in the terms of the building contract or otherwise as determined by BCISPA, usually being on the last day of the month in which the works were carried out or the goods or services were supplied.
What should I do if I am served with a Payment Claim?
A party served with a payment claim has ten business days from the date of service to provide the claimant with a payment schedule.
The payment schedule must both:
- identify the payment claim to which it relates;
- state the amount of the payment, if any, that the party proposes to make; and
- if the amount proposed to be paid is less that the amount stated in the payment claim, state why the amount proposed to be paid is less, including the respondent’s reasons for withholding any payment. It is important to note that an Adjudication Response is limited to the reasons contained in the payment schedule.
If the schedule amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less; and if it is less because the respondent is withholding payment for any reason, the schedule must indicate the respondent’s reasons for withholding payment.
Where the amount of a payment claim is to be disputed, it is extremely important that a payment schedule be served within the time permitted under BCISPA. A failure to do so may result in the party served with the payment claim becoming liable for the whole claimed amount.
What is an adjudication?
Adjudication is a less formal legal process whereby a claimant’s payment claim is assessed by an adjudicator whether or not a payment schedule is issued by the respondent. This is done by way of an adjudication application.
What if the Respondent does not serve a payment schedule or pay an adjudicated amount?
Where a party fails to serve a payment schedule in response to a payment claim, the claimant may either:
- apply directly to the Court for judgment against the respondent for the claimed amount; or
- proceed with an adjudication application.
Where a claimant decides to proceed directly to Court for judgment, the provisions of BCISPA prevent the respondent from raising any counterclaim against the claimant or any defence in relation to matters arising under the construction contract.
Alternatively, where a respondent is adjudicated to be liable for an adjudicated amount and fails to pay that amount by the date stipulated in the adjudication, then the claimant can request a certificate from the adjudicator. This adjudication certificate may then be filed as a judgment for a debt and may be enforced in a court of competent jurisdiction.
Can an adjudicated decision be set aside?
Once an adjudicated decision has been obtained it can be registered in a court. It then becomes a judgment debt. The Respondent may apply to have a judgment debt set aside. However, they are unable to raise the following:
- any counterclaim against the Claimant;
- any defence in relation to matters arising under the contract; or
- challenge the Adjudicator’s decision.
What are the time relevant frames?
Refer to our BCISPA flow chart here for a summary of the time frames.
Where can I go for help?
Rostron Carlyle Rojas Lawyers can help builders to make Payment Claims which comply with the relevant requirements and time frames. We also assist building owners or employers who have been served with a Payment Claim to respond appropriately.
For further information make an online enquiry or otherwise contact us on 02 9264 2769.
Charges under Chapter 4 of the BIF Act (Subcontractors’ Charges)
What is a Subcontractors’ Charge?
Chapter 4 of the BIF Act provides a mechanism for subcontractors to secure money owed to them by a head contractor or superior contractor.
Under normal circumstances, the building owner or employer (“the employer”) would pay the head contractor pursuant to the contract between the employer and head contractor. It is then the head contractor’s responsibility to pay the subcontractors which the head contractor has engaged. Refer to the following flow chart.
However, in some circumstances, the head contractor fails to pay the subcontractor the money owed pursuant to the subcontract, although the head contractor may still be receiving payment from the employer. The subcontractor is placed in a difficult position as there is no contract between the employer and the subcontractor which would allow the subcontractor to seek payment directly from the employer. Chapter 4 of BIF Act provides a solution for subcontractors from the difficulties which arise from being outside the ‘protection’ of the head contract.
Chapter 4 of the BIF Act allows the subcontractor to lodge a charge requiring the employer to set aside money that would have otherwise been paid to the head contractor. This money is ‘earmarked’ for the subcontractor who has not been paid. Refer to the following flow chart.
How do I lodge a charge?
To lodge a charge on money owed by the head contractor, the subcontractor must give a notice of claim of charge to the employer. The BIF Act requires the notice to include certain information including the amount and particulars of the claim supported by a statutory declaration. The subcontractor must also give notice to the head contractor that the claim has been made.
What happens after I give notice of a claim of charge?
The employer is then obliged to hold the monies due by the head contractor to the subcontractor. The subcontractor is then considered a secured creditor. If the employer fails to comply with this obligation, they can be held liable for the amount owing to the subcontractor.
The money held by the building owner may need to be shared between subcontractors in the event that a number of subcontractors lodge a charge.
Within 10 business days after the notice of the claim of charge is given to the head contractor, the head contractor must give to the employer and the subcontractor a notice (“contractor’s notice”) that:
(a) accepts liability to pay the amount claimed; or
(b) disputes the claim; or
(c) accepts liability to pay the amount stated in the contractor’s notice, but otherwise disputes the claim.
Can the employer pay the money being held directly to me?
Subcontractors should note that money held by the employer can only be paid to the subcontractor in the event that the head contractor consents or the Court makes an order that the money is to be paid. While Chapter 4 of the BIF Act provides a useful mechanism for subcontractors to secure money owed to them, it is important to be aware that it frequently results in litigation.
The subcontractor does not always receive the full amount claimed, particularly in the event that the head contractor becomes bankrupt or goes into liquidation. However, even in these circumstances the subcontractor is in a position to recover some of the money owed to them which might otherwise be unavailable in the case of bankruptcy or liquidation.
Can I ‘leapfrog’ to the owner?
Chapter 4 of BIF the Act allows subcontractors to lodge a charge directly with the owner or employer. This means that even in the event that you are a subcontractor with a number of head contractors or developers between you and the owner, you can still lodge a charge directly with the owner. This may ensure a better return for the subcontractor as it ‘leapfrogs’ directly to the entity who is making the payments. Refer to the following flow chart.
Can I still lodge a notice of charge if the head contractor or employer has gone into voluntary administration?
A notice of charge can still be lodged even if the head contractor or the employer has entered voluntary administration. This is important to note as the subcontractor may often be unaware that the head contractor is experiencing financial difficulties until the process of voluntary administration has already begun.
Where can I go for help?
For further information make an online enquiry or otherwise contact us on 07 3009 8444.
Claims concerning defective and incomplete work
Rostron Carlyle Rojas Lawyers are premier residential building defects lawyers, with extensive experience acting for homeowners, builders, developers, designers, certifiers and others.
We can offer advice and assistance in the following areas:
- Pre-contractual advice and negotiation;
- Dispute resolution for issues arising during construction projects;
- Terminating or varying contracts;
- Delays;
- Claims concerning defective or incomplete building works;
- Claims in negligence or for breach of contract against building professionals including Engineers, Architects, Principal Certifying Authorities and Construction & Design Contractors in residential building matters;
- Recommending, managing and instructing experts to assess and report on building defects;
- Proportionate liability issues;
- Insurance claims under the Queensland Home Warranty Scheme and Home Building Compensation Fund.
For further information make an online enquiry or otherwise contact us on 07 3009 8444.
Queensland Home Warranty Scheme
What is the Queensland Home Warranty Scheme?
The Queensland Home Warranty Scheme is a statutory insurance scheme that provides insurance cover for certain residential construction work valued at more than $3,300. Its purpose is to provide protection for consumers in circumstances of non-completion, defective construction, subsidence or settlement.
The scheme is currently administered by the Queensland Building and Construction Commission (QBCC).
What works are covered?
The Queensland Home Warranty Scheme covers ‘residential construction work’ as outlined in the Queensland Building and Construction Commission Act 1991 (the Act) and the Queensland Building and Construction Commission Regulation 2018.
When are premiums payable?
A policy of insurance for residential construction work must be taken out, by either the licensed contractor or the construction manager, as soon as practicable after a contract for work has been entered into.
The premium payable is based on the value of the contract. When the QBCC accepts the appropriate insurance premium in respect of residential construction work, it must issue a certificate of insurance in respect of the residential construction work. The certificate is evidence that the contracted works are covered by the scheme.
When does the policy of insurance come into force?
The policy of insurance comes into force on the earliest of the following:
- When a licensed contractor pays the appropriate insurance premium for the work;
- On the date a contract between a building contractor and a consumer is entered into for the work; or
- When a building contractor commences the work.
How do I make a claim?
A homeowner seeking to make a claim under the Queensland Home Warranty Scheme must give the QBCC notice of the claim in accordance with the regulations.
This means that a homeowner can make a claim on the insurance scheme by completing a Complaint Form and submitting the completed form to the QBCC.
What if I am served with a direction to rectify?
If the QBCC is of the opinion that building work is defective, it may direct the person who carried out the building work to rectify the building work within the period stated in the direction.
If you receive a direction to rectify, it is imperative that you comply with the direction or apply for a review within the 28 days. If you have received a direction to rectify and you were not the person who carried out the building work in question, you can challenge the validity of the direction notice.
Given the limited timeframe imposed by the QBCC in attending to a direction to rectify, it is important that you attend the initial site inspection, so that you can discuss the defects identified with the QBCC building inspector and home owner. This allows all parties to have an understanding of what is required.
What if the defective work was the fault of a subcontractor?
You should immediately alert the QBCC if the defective work was the fault of a subcontractor, so that they can also pursue the subcontractor.
A direction to rectify may be given to more than one person for the same building work; however, notification to the QBCC will not absolve you of the obligations as set out in the direction to rectify.
I did work for a developer. Does it matter if a subsequent purchaser makes a complaint about my work?
No, it does not matter if a subsequent purchaser of residential construction work makes a complaint about your work. The legislation expressly states that nothing will affect the right of a subsequent owner of residential construction work to claim indemnity under the statutory insurance scheme. The right of a subsequent purchaser to make a claim is also covered in the insurance policy conditions.
What if I am served with a scope of work?
In the event that you fail to attend to rectification, the QBCC will transfer the complaint to their insurance division who will issue a scope of work to be undertaken.
Similar to any direction to rectify, you will then have 28 days from issue of the notice to apply to the Queensland Civil and Administrative Tribunal (QCAT) for a review of the QBCC’s decision.
Payment on a claim under the Queensland Home Warranty Scheme
If you fail to comply with the direction to rectify and rectification work is required, the QBCC will usually seek tenders for carrying out the work. The QBCC (via a claims assessment) may approve a tender for a scope of works for which the owner then engages the rectifying builder under a domestic building contract.
Upon completion of the rectification works, the QBCC makes the payment under the Queensland Home Warranty Scheme and then proceeds to recover the payment against the builder. Section 71(1) of the Act enables the QBCC to recover any payment on a claim under the Queensland Home Warranty Scheme, as a debt, from the building contractor whom the relevant residential construction work was, or was to be, carried out or any other person through whose fault the claim arose.
Sections 111C (3) and (6) of the Act attaches the liability of the company to an individual who was a director of the building company when the building work, the subject of the claim was, or was to have been, carried out and/or an individual who was a director of the building company when the payment was made by the QBCC under the Queensland Home Warranty Scheme.
I did not respond to the direction to rectify and/or the scope of works and am now being pursued for the amount paid on a claim.
If you have any issues with a decision made by the QBCC in relation to defects and/or incomplete works and the proposed rectification works, you should take steps to review the decision. There are authorities which state that failure to do so will prevent the builder from raising such issues in a defence at the stage when the QBCC proceeds to recover the amount paid on the claim.
Why it is important to update my address with the QBCC?
The importance of compliance/review of decisions within tight timeframes, with respect to both directions to rectify and any scope of works received by a builder, is paramount given the consequences which may result from a failure to comply.
It is not sufficient to assert that you did not receive a notice. The relevant address for service of any notice will be the address of the licensee (builder) in the register of licensees kept by the QBCC.
Where can I go for help?
For further information make an online enquiry or otherwise contact us on 07 3009 8444.
New South Wales Home Building Compensation Fund (HBCF)
What is the New South Wales Home Building Compensation Fund?
The New South Wales Home Building Compensation Fund formerly known as the Home Warranty Insurance Fund is a statutory insurance scheme that provides insurance cover for certain residential construction works valued at more than $20,000. The scheme provides protection for consumers where:
- there has been faulty or incomplete work on residential buildings;
- the builder becomes insolvent, dies or disappears;
- the license of the Builder is suspended by NSW Fair Trading.
The scheme is currently administered by the NSW Self Insurance Corporation under the NSW Self Insurance Corporation Act 2004 and is a part of the Office of Finance and Services.
Who is the insurer?
Cover is only available from icare HBCF.
Is there a limit to the amount I can claim?
The maximum amount of cover provided under the scheme is $340,000 (for policies issued from 1 February 2012) and $340,000 for all other policies. There are other limitations on the amount that a homeowner can claim. For example, a claim for non-completion is capped at 20% of the contract price.
What works are covered?
The HBCF policy provides cover for ‘residential building work’ as outlined in the NSW Home Building Act 1989 and the NSW Home Building Regulation 2014.
When are premiums payable?
A policy of insurance for residential building work must be taken out, by the holder of the license, prior to commencing work.
The premium payable is based on an assessment of a number of risk factors which are generally specific to the project. These risk factors may include the location of the project, the contract price and the risk presented by the type of work (e.g. structural, non-structural, etc.). The builder must be assessed for eligibility before they can apply for a certificate of insurance in relation to building projects.
How do I make a claim?
A homeowner seeking to make a claim under the New South Wales Home Building Compensation Fund must first give written notice using the Loss Notification Form to the claims manager who issued the Certificate of Insurance.
A homeowner must then take action to try to have the builder finish any incomplete work and rectify any defective building work by, for example, lodging a complaint with NSW Fair Trading, lodging a building claim with the NSW Civil & Administrative Tribunal (NCAT) and/or commencing court proceedings to try to have the builder finish any incomplete work or rectify any defective work. If the homeowner fails to take steps to enforce their statutory warranty, the HBCF may be able to reduce their liability under the insurance policy.
What happens after I submit the Loss Notification Form?
Once the claims manager receives the Loss Notification, they will undertake preliminary investigations into the matter. They will also send the homeowner a Home Building Compensation Claim Form within 2 business days of the initial contact. The homeowner should complete this form as soon as practicable and return it to the claims manager. The claims manager will notify the homeowner whether the claim has been accepted or whether further information is needed within 30 days of receipt of the claim.
How long do I have to make a claim?
A homeowner wishing to make a claim must lodge a Loss Notification with the claims manager within 6 months of the homeowner becoming aware of defective work. In the event of incomplete work, the homeowner should lodge a Loss Notification within 12 months of the contract date, or the date of the commencement of work pursuant to the contract, or the date the work ceased, whichever is the later.
When does my insurance coverage end?
The coverage periods are as follows:
- non-completion – 12 months from the failure to commence or of the cessation of the work;
- major defects – 6 years from the date of completion; and
- all other defects – 2 years from the date of completion.
Does my insurance cover strata defects?
Strata defects are covered by the insurance fund. However, the claim must be issued on behalf of the Owners Corporation. Such claims may be complex, as they require approval of the Owners Committee or the Strata Plan. Our lawyers are able to streamline the process by addressing owners’ queries, assisting in preparation of the necessary documentation for the Committee and preparation and lodgement of the claim.
Where can I go for help?
Our construction team can assist you in lodging your insurance claim or otherwise contact us on 07 3009 8444.
Still not clear on your rights or unsure how to make a claim?
Speak to a construction expert.
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