Home Building - Remedies for Defective Work – Rectification Order – NCAT preferred Option

05/03/2018

Watson & Watson have been acting for owners, Builders and others in proceedings brought generally by Owners or subsequent Owners who may be entitled to bring a claim in numerous jurisdictions including the Civil and Administrative Tribunal (NCAT) which has jurisdiction for claims up to $500,000.00.  Other claims in excess of that sum are commenced in the District Court of NSW or the Supreme Court of NSW, each of them have jurisdiction.

We have been engaged in matters relating to home building including other building matters for many years and have had many cases relating to the Home Building Act since it became law in 1989.  There have been various changes to the Act over the years including changes in 2014.

Prior to the changes in 2014 when acting on behalf of a Builder Watson & Watson in addition to other defences available, recommended that the Builder offer to return to the site to undertake the claimed defective work as may be accepted by the Tribunal.  This approach was adopted by us having regard to the generally accepted evidence that a Builder undertaking rectification work would be entitled to a builder’s margin significantly in excess of the builder’s margin that applied to the original building works.  Builders’ margins to cover profit and overheads have ranged from 10% to 20% generally for new works and significant renovations to residential buildings.  The Tribunal has allowed up to 35% builders’ margin for the cost of rectification of defective work by Builders rectifying the work. The Builder rectifying the work of others applies a contingency to cover rectification works and possible further claims relating to the works originally undertaken.

The effect of such approach by us has been that many cases have resolved as the Owner is adamant that the Builder who undertook the original work will not be allowed to return to the property to undertake further works.

Under the 2014 amendments to the Home Building Act a Court or Tribunal in determining a building claim involving an allegation of defective residential building work against a Builder the responsible Builder is to have regard to the principle that the rectification of the defective work by the responsible Builder is the preferred outcome.  Now it is mandatory that the Court or Tribunal consider such an order.

This has not changed the mind of most Owners that they would either prefer or vehemently oppose the responsible Builder returning to the property.

One effect of the change is that there are now more agreements reached:

1. To allow the Builder to undertake the rectification of defective work; or
2. For the Owner to accept a sum (often less than the costs of having a new Builder rectify the works) in satisfaction of the Owner’s claim.

Unfortunately we find that most parties in disputes do not adequately consider this opportunity and the obligation of the Tribunal to proceed on the basis that the responsible Builder would be allowed to complete the works.

The Owner hopes that a payment will be made by the Builder to the Owner to cover the cost of rectification of the defective works.

We encourage and hopefully these matters can be considered at any early stage so that appropriate costs can be saved.

What happens if the Builder does not comply with the orders made by an agreement or after a hearing for the Builder to carry out the works?

The Civil and Administrative Act 2013 now allows for what is called a Renewal Application to be made (usually within 12 months of the date for compliance with the orders).  A Renewal Application is made pursuant to the Civil and Administrative Act 2013. 

This provides that if the Order has not been complied with, a person for example an Owner is given leave to “renew” the proceedings.

On the Renewal Application the Tribunal may then make any other appropriate Order however that Order is one that could have been made when the matter was originally determined.  This clearly raises the issue as to what Orders could be made at the original hearing.  There needs to be extreme care as to the format of the Order.  One needs to look at the substance of the Order and agreement to ascertain whether that is an Order that could have been made at the time of the original hearing.

If you are facing a dispute or wish to pre-empt a dispute with an Owner or Builder regarding the rectification of defective building works or a rectification Order please do not hesitate to contact Richard Watson Accredited Specialist Building & Construction or his assistant Shereen Da Gloria to discuss your concerns.   Seeking the right advice at the right time can often save you unnecessary angst and money.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 02 9221 6011.