Construction Risks and Clauses to Mitigate Risks
| Common Construction Risk | Clause That Addresses Risk |
| Defective workmanship or materials | The contractor warrants that all work performed and materials used in the construction of the home will be free from defects for a period of X years from the date of completion. |
| Failure to comply with building codes and regulations | The contractor shall be responsible for obtaining all necessary permits and approvals, and shall comply with all building codes and regulations applicable to the work. |
| Delays in completion of work | The contractor shall complete the work within the time specified in the contract, subject to reasonable extensions of time for delays caused by the owner or other factors beyond the contractor’s control. |
| Poor quality of work | The owner may require the contractor to correct any work that is defective or of poor quality, at the contractor’s expense, within a reasonable time after written notice of the defects is given to the contractor. |
| Disputes over defects | Any disputes arising under this contract related to building defects shall be resolved through mediation or arbitration, in accordance with the rules of the New South Wales Civil and Administrative Tribunal (NCAT) or other agreed-upon dispute resolution process. |
| Non-payment by owner | In the event the owner fails to make any payments due under this contract, the contractor shall have the right to suspend work until such payments are made in full. |
Homeowners should exercise due diligence and make sure to include in their home building contracts, clauses to manage the risks associated with building defects, and terminate the contract, if necessary.
Sample Contract Clauses to Manage Building Defect Risks
The following sample contract clauses are intended to help NSW homeowners manage the risks associated with building defects and ensure that their rights are protected in the event that their builder fails to meet their contractual obligations. These clauses can be used as a guide when drafting a home building contract and can be adapted to suit the specific needs and circumstances of each individual homeowner.
| Risk | Suggested Building Contract Clause |
| Building defects | The builder warrants that all work will be carried out in a proper and workmanlike manner in accordance with all applicable laws, regulations and codes. Any defects in the workmanship or materials must be reported to the builder in writing within 30 days of discovery. The builder must remedy any such defects within a reasonable time period, as determined by the owner in consultation with an independent expert. If the builder fails to remedy such defects within the required time period, the owner may terminate this agreement and engage another builder to complete the work. |
| Delays | The builder acknowledges that time is of the essence in completing the work. The builder shall provide the owner with a realistic and achievable completion date and shall use its best efforts to complete the work on or before that date. In the event that the work is not completed on or before the agreed completion date due to the fault of the builder, the owner may terminate this agreement and engage another builder to complete the work. |
| Payment disputes | The owner shall make progress payments in accordance with the schedule set out in the contract. In the event of a dispute regarding the amount or timing of any progress payment, the owner may withhold payment until the dispute is resolved in accordance with the dispute resolution clause of this agreement. If the builder fails to resolve the dispute within a reasonable time period, as determined by the owner, the owner may terminate this agreement and engage another builder to complete the work. |
| Non-compliance with building standards | The builder shall comply with all applicable laws, regulations and codes, including but not limited to the Building Code of Australia, and any other relevant standards or guidelines. If the builder fails to comply with any such requirements and is unable or unwilling to remedy such non-compliancea> within a reasonable time period, as determined by the owner in consultation with an independent expert, the owner may terminate this agreement and engage another builder to complete the work. |
| Dispute resolution | Any disputes arising out of or in connection with this agreement shall be resolved in accordance with the dispute resolution clause set out in this agreement. If the builder fails to participate in the dispute resolution process in good faith, the owner may terminate this agreement and engage another builder to complete the work. |
It’s important to note that these are just suggested clauses and should be tailored to the specific needs and circumstances of the homeowner and the project. Additionally, it’s important to consult with a qualified legal professional to ensure that the contract clauses are legally sound and enforceable.
Takeaways
In conclusion, building defects can be a major headache for homeowners, causing stress, frustration, and financial burden. However, with careful planning and foresight, many of these issues can be managed effectively before they arise. By incorporating the suggested clauses into your home building contract, you can ensure that your rights as a homeowner are protected, and that you have recourse in the event that things go wrong.
Additionally, if you are facing building defects and disputes with builders or contractors, it is important to seek the help of a specialist construction lawyer who can guide you through the legal processes and help you achieve a positive outcome. Don’t let building defects get the best of you – take action now to protect your home and your future.
