Buying a new home? Are you covered for building works?

3 Dec

If you are looking to buy a new (or renovated) home, it is important to know your rights regarding any recent building works including defects.

Unfortunately for some, building defects may not arise until after settlement. If you find problems with the building work in your new home, whether it be a newly built house, or a home with recent extensions, renovations or repairs, you may be covered by warranties that run with the land. Typically, there are four different scenarios for home buyers, some of which give buyers the rights to a claim.

1. Homes built by a registered Builder:

The vendor is unrelated to the Builder;
The Building Permit is obtained by the Builder;
The Builder will warrant the works to the owner under Section 8 of the Domestic Building Contract Act 1995 (including that works are done with due skill and care); and
Warranty claims are subject to a limitation period of 10 years from the Occupancy Permit.

The home warranty insurance will also last 6 years from the Occupancy Permit.

In this scenario, the Builder may have defences available – such as caveat emptor, (buyer beware), where obvious defects are not claimable by purchasers.

2. Homes bought Off the Plan:

The vendor is usually unrelated to the Builder;
The Building Permit is obtained by the Builder;
Purchasers will not have a contract with the Builder, only a contract of sale with the Vendor/Developer;
S137E of the Domestic Building Contract Act 1995 provides that Off the Plan homes must be under a major domestic building contract, therefore warranties apply;
Insurance will exist for most buildings, however not for high-rise apartments (over three storeys);
Off the Plan purchasers may have claims available under the Sale of Land Act 1962; and
The Vendor can rely on the contract for some defences under the contract including some exclusion clauses.

3. Homes sold by an Owner Builder:

The vendor is not the Builder;
The Building Permit is obtained by the owner;
Warranties under Section 137C must be included in the contract of sale for homes sold within the prescribed period of 6 years and 6 months from the Occupancy Permit; and
Owner Builder insurance will last 6 years from the Occupancy Permit.

In this scenario, the owner/builder may have defences available – such as caveat emptor (buyer beware), for any defects identified in a pre-inspection report (S137B must provide report in prescribed period).

4. Homes built and sold by a registered Builder:

The vendor is the Builder;
The Building Permit is obtained by the Builder;
Namely called Spec Homes;
Usually not built under a contract, which does not allow for Section 8 warranties;
The build is similar to Owner Builder construction, therefore Section 137C will apply; and
Owner Builder insurance will apply as above.

Pre-purchase inspection & legal advice:

It is strongly recommended that the purchaser seeks both:

Pre-purchase inspection to identify issues; and
Legal advice on the contract to ensure all rights are explained prior to sale.

Once the contract is signed, your rights may be extinguished.

Our services:

Purchasing a newly built property raises many issues that require analysis and scrutiny from lawyers that are experts in construction litigation.

If you have any concerns about your purchase contract, do not hesitate to contact our team at Oldham Construction Lawyers before you sign. We can help to establish the cause and extent of the problem and provide professional advice on the appropriate steps to take.

Amy Fettes