Building and construction disputes

Points worth knowing

• Statutory warranties. Every contract to do residential building work in NSW carries implied warranties: the work will be done with due care and skill and in accordance with the plans, the materials will be good and suitable and new unless the contract says otherwise, the work will comply with the law, it will be done within the agreed or a reasonable time, and the result will be reasonably fit to live in. These warranties also run between a head contractor and its subcontractors.
• Two warranty periods. Proceedings for breach of a statutory warranty must be started within 6 years after completion for a major defect, and within 2 years in any other case; a breach that appears in the last 6 months of the period gets a further 6 months. A major defect is a defect in a major element, such as a load-bearing component, a fire safety system or waterproofing, that makes the building unusable, destroys it or threatens its collapse, or is likely to.
• Licence and insurance. Residential building work worth more than $5,000 must be done under a contractor licence. Work with a contract price above $20,000 must be covered by home building compensation insurance, and the builder cannot demand a deposit or any other payment until the certificate of insurance has been given. A contract above $20,000 must be in writing and signed, and the owner may rescind it within 5 clear business days of receiving a signed copy.
• An unlicensed contractor cannot enforce the contract. A person who contracts to do residential building work without the required licence, or without the written contract the Act requires, cannot recover damages or enforce the contract, although they remain liable for their own breaches.
• Security of payment. A contractor or subcontractor may serve a payment claim on and from the last day of each month, and the claim must identify the work, state the amount and state that it is made under the Act. The recipient has 10 business days, or less if the contract says so, to serve a payment schedule saying how much it will pay and why; if it serves none, it becomes liable for the full claimed amount on the due date. Unpaid claims can go to a fast adjudication, and an adjudication certificate can be filed as a court judgment. These rights cannot be contracted out of. They are not available to a builder who is unlicensed or uninsured when the law requires it.
• Where the dispute is heard. NCAT can hear a building claim of up to $500,000. The Act directs courts and the Tribunal to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.

Common questions