BUILDING DISPUTES – Claims of Poor workmanship against Builders
When can you make a claim?
When entering into a domestic building contract, be it for the full construction of a house, or simply renovations or extensions to an existing building, the law adds a number of compulsory warranties to the contract.
The Domestic Building and Contracts Act 1995 introduces into all contracts what are often referred to as ‘Section 8’ warranties. These warranties ensure the builders have certain obligations and must meet certain standards when completing the work. If the builder breaches these obligations, or fails to meet these standards, an action can be brought against them for damages.
The warranties require the builder to do as follows:
To complete work in a proper and workman like manner, and in accordance with the plans and specifications;
To use good materials which are suitable and new (unless the owner specifically requests otherwise e.g. using salvaged timber);
To ensure all work complies with relevant laws and legal requirements;
To use reasonable care and skill, and complete the work on time;
To ensure the completed work will be suitable for occupation; and
To use their skill, judgement, and suitable materials to ensure the work achieves the purpose as set out in the contract.
These warranties run with the land, which means if the work is completed, and the land has been subsequently sold, the new owner will be protected by the warranties and would be able to claim for losses as a result of any defective works undertaken on the land.
The warranties also can’t be avoided, meaning even if a term in the contract attempts to exclude a warranty, it will still apply to owners and subsequent purchasers.
If, following or during the work, defects or issues arise in the builder’s work, an action can be brought against them for breach of the builder’s warranties.
In order to do so, certain time limits must be adhered to.
Most building dispute claims will be brought before the Victorian Civil and Administrative Tribunal (VCAT). The Building Act 1993 sets out that any action must be brought before VCAT within 10 years of the occupancy permit, or final inspection certificate, being issued for the works. If the works were terminated prior to completion, then the time limit begins at the point of termination, or the last time the builder was on site.
Certain steps must be taken before a matter can be brought before VCAT, including an application to Domestic Building Disputes Resolution Victoria (DBDRV). The DBDRV process will attempt to resolve the matter through discussions between the parties. If the discussions are unsuccessful, the DBDRV will issue a certificate allowing the matter to proceed to VCAT.
It is very important to note that the DBDRV process must be completed within the 10-year time limit. The DBDRV process can take some time, and the clock will not stop during these proceedings.
Domestic Building Insurance Policies
Other time limits to consider include those contained within the Domestic Building Insurance (DBI) policy. The Domestic Building Insurance Policy runs with the land and protects the owner and subsequent purchaser against any building defects for up to $300,000
This policy provides cover for claims in the event the builder dies, becomes insolvent, disappears, or fails to comply with a tribunal/court order. The terms of the policy set out a 2-year time limit for ‘non-structural defects’ (i.e. issues with painting, joinery, internal doors etc.), and a 6-year time limit for ‘structural defects’ (i.e. foundations, roof issues, load-bearing walls etc.).
You can still claim pursuant to the Domestic Building Insurance Policy even after the 6 year or 2 year limitation period, or when the policy has expired as long as you can prove that your loss occurred during the insured period.
The time limits begin at the point the work was completed, or in the case of a dispute, the point at which the contract was terminated.
Further time limits can come into play when an action relates to negligence, or seeks to include 3rd parties.
Resolving a dispute: What are my options?
Got a domestic building dispute?
Disputes over building contracts are on the rise.
For homeowners and house purchasers, disputes can leave them arguing with a builder who has done a poor job. Disputes also arise where the building of the home or completion of the work seems like it will never be finished.
For builders, payment disputes can arise for work completed a long time ago.
Option 1: Resolving the dispute yourself.
In Victoria many domestic building disputes are resolved by the parties themselves, through negotiating an outcome that is satisfactory to each side. If you feel comfortable, the first thing you should consider doing is to try and resolve the dispute yourself.
You can try and resolve the problem by speaking directly to the other party.
If this does not work, consider sending them a letter or email, outlining the issue from your perspective and requesting a response. This type of written communication can be relied on later if you pursue your dispute further.
If you are trying to resolve the dispute yourself, you should consider:
Keeping copies of all relevant documents (for example, contracts, invoices and written communications).
Keeping a record of all conversations you have had with the other party, for example, write down what was said in a diary.
Taking photos of the work that you are concerned about.
If you do not receive a response from the other party in a reasonable time frame or you are not happy with that response, you can choose to pursue a more formal procedure.
Option 2: Domestic Building Dispute Resolution Victoria (DBDRV)
In Victoria, the most common avenue for resolving domestic building disputes is through Domestic Building Dispute Resolution Victoria (DBDRV).
DBDRV is a free government service designed to help building owners and builders resolve their domestic (residential) building disputes.
Building owners, builders, sub-contractors, architects and other building practitioners such as surveyors, engineers and draftspersons are eligible to apply for dispute resolution through DBDRV.
Types of disputes dealt with through DBDRV include:
Defective or incomplete building work
Issues with payment
Issues about the domestic building contract
Importantly, before you access DBDRV you are required by law to have taken ‘reasonable steps’ to resolve the dispute independently. At a minimum, ‘reasonable steps’ include:
Trying to contact the other party to raise your concerns, repeatedly if they did not respond.
Engaging with the other party, if they are willing to do so, to try and resolve your issue; and
Preferably advising the other party that you intend to lodge an application with DBDRV’s dispute resolution service.
There are also strict eligibility criteria for lodging a dispute with DBDRV. To be eligible for dispute resolution through DBDRV, the dispute must:
Relate to more than one of the following types of work: plumbing, painting, plastering, tiling, insulating, glazing, concreting, installing floor coverings, electrical work, or fencing (that does not require a permit) where the work is not part of a contract which also covers other types of building works.
Involve the building owner.
Not be the subject of a previous or current VCAT proceeding (limited exceptions apply).
Not relate to building work that is more than 10 years old.
Concern domestic (residential) building work including construction, renovation, alteration, extension, demolition or home improvements of some kind.
If you are eligible to access DBDRV, you may submit an online application for dispute resolution through the DBDRV’s online portal. You will be required to submit your contact details, the other party’s details and details about the dispute.
A jurisdiction check will then be undertaken by a Dispute Resolution Officer (DRO), who will evaluate whether your dispute is covered by DBDRV.
The Officer will then undertake an initial assessment of your dispute to determine if it is suitable for conciliation.
If your application is accepted, all parties to the dispute will be required to attend a conciliation. Conciliation is a dispute resolution process where all the parties in a dispute are brought together to try and resolve the matter. This discussion is facilitated by an independent conciliator.
Prior to conciliation, you may be asked to provide relevant documents pertaining to the dispute, such as building contracts, architectural drawings, extension of times requests or occupancy permits. As part of this process, a DBDRV building assessor may examine the building work in dispute. Assessors determine whether domestic building work is defective or incomplete. They may also specify the cause of a defect and a timeframe for any work required to rectify or complete the building work.
At the conciliation conference, one of the following outcomes may be achieved:
Agreement: If the parties resolve the dispute, this will be documented in a formal record of agreement. This record will contain the actions agreed to by the parties and relevant dates. It is the responsibility of the parties to honour the terms of the agreement
Dispute Resolution Order: If the parties either partially resolve their dispute or are unable to resolve their dispute, the Chief Dispute Resolution Officer (CDRO) may issue a binding Dispute resolution order against one or both parties. There are consequences for a party who does not comply with an order. The CDRO can issue a dispute resolution order if the dispute was not resolved by conciliation, was partially resolved or when a record of agreement was not honoured. Where an order is made about defective or incomplete work against a builder who did not participate in conciliation, they may be liable for the cost of the building assessor’s report on which the order was based
Certificate of Conciliation: If the parties are unable to resolve their dispute at the conciliation conference, the Chief Dispute Resolution Officer may issue the parties with a certificate of conciliation. The parties will then be entitled to make an application to VCAT, if they wish.
If a party does not participate, DBDRV may do any of the following things in their absence:
Appoint an assessor to conduct a building assessment of the domestic building work in dispute.
Issue a dispute resolution order.
Issue a certificate stating that you failed to participate in conciliation.
Some notes on Binding Orders issued by the DBDRV
If your dispute is not resolved by conciliation, or a record of agreement is not honoured, the Chief Dispute Resolution Officer may issue a binding Dispute resolution order.
Before deciding whether to issue a Dispute resolution order, the Chief Dispute Resolution Officer will consider:
the building assessment reports
the extent of non-compliance with the record of agreement
whether there has been any change in the nature of the dispute or the circumstances of the parties since the assessor’s report (if any) was delivered.
Orders that DBDRV can make
A dispute resolution order issued against a building owner can direct them to:
pay money to the builder for the completion of building work by a specified date
pay money into the Domestic Building Dispute Resolution Victoria Trust Fund, to be held until the defective or incomplete building work is fixed or completed
refrain from doing anything that would stop the builder from complying with the contract or their warranty obligations.
A dispute resolution order issued against a builder can direct them to:
rectify defective building work by a specified date
complete the building work in accordance with the contract by a specified date
rectify any damage, caused as a result of carrying out the building work, by a specified date
pay for the reasonable cost of another builder to rectify or complete the building work (if the building work is too defective to allow them to continue)
arrange for the building work to be carried out by a registered builder (if the building work in dispute should have been carried out by a registered builder) by a specified date.
Note: An order can include a finding that the building work in dispute is not defective or incomplete.
Challenging a dispute resolution order
Parties who have had a dispute resolution order issued against them may seek to have it reviewed by VCAT on the basis that:
the description of the defective or incomplete building work is not accurate
the due date for carrying out the specified building work is not reasonable
any requirement in the order to take or refrain from taking specific action is unreasonable.
If a builder fails to comply with a dispute resolution order
The building owner can notify DBDRV if a builder fails to comply with a dispute resolution order.
DBDRV will direct an assessor to check the status of the building work and report on whether the order has been complied with. If the order has been breached, DBDRV will notify both parties by issuing a notice of breach of dispute resolution order.
The owner is then entitled to end the contract (as long as they have met any requirement in a dispute resolution order issued against them) and, if they wish, apply to VCAT for appropriate orders.
Builder challenging a breach notice
A builder who has been issued with a notice of breach of dispute resolution order can seek a review in VCAT by:
challenging the accuracy of the DBDRV building assessment report(s) on which the dispute resolution order is based, or
by proving that the dispute resolution order has since been complied with.
If a builder challenges the breach notice, the owner must wait for the outcome of the review in VCAT before exercising their right to end the contract.
VBA disciplinary action against builders
There are serious consequences if DBDRV issues a breach notice to a builder.
The Chief Dispute Resolution Officer must give a copy of that notice to the VBA (unless the builder applies for a review at VCAT and that review is successful).
The VBA then has 28 days in which to commence disciplinary action against the builder by issuing a 'show cause' notice. The 'show cause' notice must propose suspension of the builder's registration.
Builders can visit the Discipline page at the VBA website for more information.
If a building owner fails to comply with a dispute resolution order
The builder is entitled to end the contract and apply to VCAT for:
an order for damages as a result of the loss of work caused by the early end to the contract
payment for works carried out to date
Option 3: Victorian Civil and Administrative Tribunal (VCAT) Application
As a last resort, you may choose to make an application to the Victorian Administrative and Civil Tribunal (VCAT). While it is possible for you to lodge a claim in VCAT yourself, running a claim through VCAT can be a complicated and difficult process. You should seek legal advice prior to contemplating issuing a VCAT claim.
Importantly, with some limited exceptions, you cannot lodge an application with VCAT unless you have already attempted to resolve the dispute through DBDRV. On exception is where you need to apply for an injunction to immediately stop the other party from doing something, or make the other party do something immediately. You should seek legal advice if you believe that this exemption may apply to you.
Domestic building applications filed with the VCAT are generally referred to mediation (conducted by a mediator) or a compulsory conference (conducted by a VCAT member). If the parties are unable to resolve the building dispute at mediation or compulsory conference, then the matter will be referred to a hearing conducted by a VCAT member.
Whilst VCAT is not bound by the normal rules of evidence, the hearing is a formal process which is similar to a court hearing. Lawyers often appear before VCAT and the VCAT member has the power to make a final, binding decision. State courts have the power to enforce VCAT orders if they are not complied with.
If you think you may want to investigate your claim further, or have any questions about your domestic building dispute or the relevant dispute resolution processes, please contact us below.